10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011
Commission file number 1-08246
Southwestern Energy Company
(Exact name of registrant as specified in its charter)
Delaware		71-0205415
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2350 North Sam Houston Parkway East, Suite 125, Houston, Texas		77032
(Address of principal executive offices)		(Zip Code)
(281) 618-4700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Name of each exchange on which registered
Common Stock, Par Value $0.01		New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:  None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesx     Noo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    Nox
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. Yesx   Noo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx   Noo    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o     No x
The aggregate market value of the voting stock held by non-affiliates of the registrant was $14,642,400,618 based on the New York Stock Exchange – Composite Transactions closing price on June 30, 2011, of $42.88. For purposes of this calculation, the registrant has assumed that its directors and executive officers are affiliates.
As of February 23, 2012, the number of outstanding shares of the registrant’s Common Stock, par value $0.01, was 349,044,745.
Document Incorporated by Reference
Portions of the registrant’s definitive proxy statement to be filed with respect to the annual meeting of stockholders to be held on or about May 22, 2012 are incorporated by reference into Part III of this Form 10-K.

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SOUTHWESTERN ENERGY COMPANY
ANNUAL REPORT ON FORM 10-K
For Fiscal Year Ended December 31, 2011

TABLE OF CONTENTS

Page

Business

Glossary of Certain Industry Terms

Risk Factors

Unresolved Staff Comments

Properties

Legal Proceedings

Mine Safety Disclosures

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Stock Performance Graph

Selected Financial Data

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Results of Operations

Liquidity and Capital Resources

Critical Accounting Policies and Estimates

Cautionary Statement about Forward-Looking Statements

Quantitative and Qualitative Disclosures about Market Risk

Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Controls and Procedures

Other Information

Directors, Executive Officers and Corporate Governance

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accounting Fees and Services

Exhibits, Financial Statement Schedules

This Annual Report on Form 10-K includes certain statements that may be deemed to be “forward-looking” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. We refer you to “Risk Factors” in Item 1A of Part I and to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Statement about Forward-Looking Statements” in Item 7 of Part II of this Form 10-K for a discussion of factors that could cause actual results to differ materially from any such forward-looking statements. The electronic version of this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those forms filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge as soon as reasonably practicable after they are filed with the Securities and Exchange Commission, or SEC, on our website at www.swn.com.  Our corporate governance guidelines and the charters of the Audit, Compensation, Nominating and Governance and Retirement Committees of our Board of Directors are available on our website, and are available in print free of charge to any stockholder upon request.

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ITEM 1.  BUSINESS

Southwestern Energy Company is an independent energy company engaged in natural gas and oil exploration, development and production (E&P). We are also focused on creating and capturing additional value through our natural gas gathering and marketing businesses, which we refer to as Midstream Services.  

Exploration and Production - Our primary business is the exploration for and production of natural gas and oil, with our current operations being principally focused within the United States on development of an unconventional gas reservoir located on the Arkansas side of the Arkoma Basin, which we refer to as the Fayetteville Shale play.  We are also actively engaged in exploration and production activities in Pennsylvania, where we are targeting the unconventional gas reservoir known as the Marcellus Shale, and to a lesser extent in Texas and in Arkansas and Oklahoma in the Arkoma Basin.  We also engage in exploration activities in order to test new plays and recently commenced exploration operations in Arkansas and Louisiana relating to an unconventional horizontal oil play targeting the Lower Smackover Brown Dense formation (LSBD).  In addition, in 2010, we commenced an exploration program for natural gas and crude oil under 32 licenses in New Brunswick, Canada.  We conduct our exploration and production operations through our wholly-owned subsidiaries, SEECO, Inc., or SEECO, and Southwestern Energy Production Company, or SEPCO. SEECO operates exclusively in Arkansas where it holds a large base of both developed and undeveloped gas reserves, and conducts the Fayetteville Shale drilling program and the conventional Arkoma Basin drilling program in the Arkoma Basin. SEPCO conducts development drilling and exploration programs in Pennsylvania, Oklahoma, Texas, Arkansas and Louisiana.  DeSoto Drilling, Inc., or DDI, a wholly-owned subsidiary of SEPCO, operates drilling rigs in Arkansas, Pennsylvania and Louisiana, as well as our other operating areas.  Our Canadian operations are conducted by our subsidiary, SWN Resources Canada Inc.  

Midstream Services - We engage in natural gas gathering activities in Arkansas, Texas and Pennsylvania through our gathering subsidiaries, DeSoto Gathering Company, L.L.C., which we refer to as DeSoto Gathering, and Angelina Gathering Company, L.L.C., which we refer to as Angelina Gathering. DeSoto Gathering and Angelina Gathering primarily support our E&P operations and generate revenue from gathering fees associated with the transportation of our and third party gas to market. Our natural gas marketing subsidiary, Southwestern Energy Services Company, or SES, captures downstream opportunities which arise through the marketing and transportation of the natural gas produced in our E&P operations.  

The vast majority of our operating income and earnings before interest, taxes, depreciation, depletion and amortization, or EBITDA, is derived from our E&P business.  In 2011, 77% of our operating income and 84% of our EBITDA were generated from our E&P business, compared to 81% of our operating income and 86% of our EBITDA in 2010, and 86% of our operating income and 90% of our EBITDA in 2009, absent our $907.8 million, or $558.3 million net of taxes, non-cash ceiling test impairment of our natural gas and oil properties.  In 2011, 23% of our operating income and 16% of our EBITDA were generated from Midstream Services, compared to 19% of our operating income and 14% of our EBITDA in 2010, and 14% of our operating income and 10% of our EBITDA in 2009, absent the non-cash ceiling test impairment of our natural gas and oil properties.  EBITDA is a non-GAAP measure.  We refer you to “Business — Other Items — Reconciliation of Non-GAAP Measures” in Item 1 of Part I of this Form 10-K for a table that reconciles EBITDA to net income (loss) attributable to Southwestern Energy.   

Our Business Strategy

Since 1999, our management has been guided by our formula, which represents the essence of our corporate philosophy and how we operate our business:

Our formula, which stands for “The Right People doing the Right Things, wisely investing the cash flow from our underlying Assets will create Value+,” also guides our business strategy.  We are focused on providing long-term growth in the net asset value of our business.  In our E&P business, we prepare an economic analysis for each investment opportunity based upon the expected present value added for each dollar to be invested, which we refer to as Present Value Index, or PVI.  The PVI of the future expected cash flows for each project is determined using a 10% discount rate.  We target creating at least $1.30 of discounted pre-tax PVI for each dollar we invest in our E&P projects.  Our actual PVI results are utilized to help determine the allocation of our future capital investments.  The key elements of our business strategy are:

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·

Exploit and Develop Our Positions in the Fayetteville Shale and the Marcellus Shale.  Our primary focus is to maximize the value of our significant acreage position in the Fayetteville Shale play, which has provided significant production and reserve growth since we began drilling in the play in 2004. At December 31, 2011, we held approximately 925,842 net acres in the Fayetteville Shale play and the area accounted for approximately 87% of our total proved oil and natural gas reserves and approximately 87% of our total oil and natural gas production during 2011.  Additionally, we are actively drilling on portions of our 186,893 net acres in the Marcellus Shale and believe our production and reserves from this play will grow substantially over the next few years.  We intend to further develop our acreage positions in the Fayetteville Shale and the Marcellus Shale and improve our well results through the use of advanced technologies and detailed technical analysis of our properties.  

·

Grow through New Exploration and Development Activities Focusing on Emerging Unconventional Plays.  We actively seek to find and develop new oil and natural gas plays with significant exploration and exploitation potential, which we refer to as “New Ventures.” Our New Ventures prospects are evaluated based on repeatability, multi-well potential and land availability as well as other criteria, and can be located both inside and outside of the United States.  As of December 31, 2011, we held 3,600,314 net undeveloped acres in connection with our New Ventures prospects, including 2,518,518 net acres in New Brunswick and 520,619 net undeveloped acres in the LSBD formation in southern Arkansas and northern Louisiana.  

·

Maximize Efficiency through Vertical Integration and Economies of Scale.  In our key operating areas, the concentration of our properties allows us to achieve economies of scale that result in lower costs.  We seek to serve as the operator of the wells in which we have a significant interest. As the operator, we are better positioned to control the enhancing, drilling, completing and producing of wells and the marketing of production to minimize costs and maximize both production volumes and realized price.  In our Fayetteville Shale play, we have achieved significant cost savings by operating a fleet of drilling rigs designed specifically for the play and from our other associated oilfield services including our sand mine that is a source of proppant for our well completions.  During 2012, we plan to commence providing pressure pumping services for certain of our operated well completions.  

·

Enhancing the Value of Our Midstream Operations.  We have continued to design and improve our gas gathering infrastructure to better manage the physical movement of our production and the costs of our operations.  As of December 31, 2011, we have invested approximately $933.0 million in the 1,791 mile gas gathering system built for our Fayetteville Shale play, which was gathering approximately 2.1 Bcf per day at year-end, and have invested approximately $44.2 million in 38 miles of gas gathering lines in East Texas and Pennsylvania.  Our gathering system for the Fayetteville Shale play has developed into a strategic asset that not only supports our E&P operations but also will increase our overall returns on a standalone basis.

Recent Developments

2012 Planned Capital Investments and Production Guidance.  Our planned capital investment program for 2012 is approximately $2.1 billion, which includes approximately $1.8 billion for our E&P segment, $190 million for our Midstream Services segment and $90 million for corporate and other purposes.  Our 2012 capital program is expected to be primarily funded by our cash flow from operations and borrowings under our $1.5 billion revolving credit facility.  The planned capital program for 2012 is flexible and we will reevaluate our proposed investments as needed to take into account prevailing market conditions. Based on our capital program, we also announced our targeted 2012 natural gas and oil production of approximately 560 to 570 Bcfe, an increase of approximately 13% over our 2011 production, using midpoints.

Exploration and Production

Overview

Our operations are primarily focused on the Fayetteville Shale, an unconventional reservoir located in the Arkoma Basin in Arkansas.  In addition to our Arkansas operations, we are also continuing to expand our drilling program on our acreage in Pennsylvania targeting the Marcellus Shale and we will conduct both conventional and unconventional operations targeting various formations as part of our New Ventures projects, which include the recently announced unconventional horizontal oil plays targeting the Brown Dense formation in Arkansas and Louisiana, and exploration activities in New Brunswick, Canada.  We continue to actively seek to develop both conventional and unconventional natural gas and oil resource plays with significant exploration and exploitation potential.

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Our E&P segment recorded operating income of $825.1 million in 2011. Our E&P segment recorded operating income of $829.5 million in 2010 and an operating loss of $157.7 million in 2009 as a result of the recognition of a $907.8 million, or $558.3 million net of taxes, non-cash ceiling test impairment of our natural gas and oil properties recorded for the three months ended March 31, 2009.  The slight decrease in operating income in 2011 was primarily due to lower prices realized from the sale of our natural gas production and an increase in operating costs and expenses which was largely offset by a 24% increase in our total natural gas and oil production. The increase in operating income in 2010 was primarily due to a 35% increase in our total natural gas and oil production which was partially offset by lower prices realized from the sale of our natural gas production and an increase in operating costs and expenses. EBITDA from our E&P segment was $1.5 billion in 2011, compared to $1.4 billion in 2010 and $1.2 billion in 2009. The increase in our EBITDA in 2011 was due to our increased production volumes which was partially offset by lower prices realized from the sale of our natural gas production and increased operating costs and expenses.  The increase in our EBITDA in 2010 was due to our increased production volumes which was partially offset by lower prices realized from the sale of our natural gas production and increased operating costs and expenses.  EBITDA is a non-GAAP measure. We refer you to “Business — Other Items — Reconciliation of Non-GAAP Measures” in Item 1 of Part I of this Form 10-K for a reconciliation of EBITDA to net income (loss) attributable to Southwestern Energy.

Our Proved Reserves

Our estimated proved natural gas and oil reserves were 5,893 Bcfe at year-end 2011, compared to 4,937 Bcfe at year-end 2010 and 3,657 Bcfe at year-end 2009. The overall increase in total estimated proved reserves in the past three years is primarily due to the development of the Fayetteville Shale play in Arkansas, with the development of the Marcellus Shale play in Pennsylvania also contributing in 2011.  The average prices utilized to value our estimated proved natural gas and oil reserves at December 31, 2011 were $4.12 per MMBtu for natural gas and $92.71 per barrel for oil compared to $4.38 per MMBtu for natural gas and $75.96 per barrel for oil at December 31, 2010 and $3.87 per MMBtu for natural gas and $57.65 per barrel for oil at December 31, 2009.

The after-tax PV-10, or standardized measure of discounted future net cash flows relating to proved gas and oil reserve quantities, was $3.5 billion at year-end 2011, compared to $3.0 billion at year-end 2010 and $1.8 billion at year-end 2009.  The increase in our after-tax PV-10 value in 2011 was primarily due to the increase in our reserves, partially offset by a comparative decrease in average 2011 prices for natural gas from average 2010 prices. The increase in our after-tax PV-10 value in 2010 was primarily due to the increase in our reserves and a comparative increase in average 2010 prices for natural gas from average 2009 prices, partially offset by higher operating and future development costs.  Our proved reserves are almost entirely natural gas and as such the after-tax PV-10 measure is highly dependent upon the natural gas price used in the after-tax PV-10 calculation. The reconciling difference in after-tax PV-10 and pre-tax PV-10 (a non-GAAP measure which is reconciled in the 2011 Proved Reserves by Category and Summary Operating Data table below) is the discounted value of future income taxes on the estimated cash flows.  Our year-end 2011 estimated proved reserves had a present value of estimated future net cash flows before income tax, or pre-tax PV-10, of $4.8 billion, compared to $4.3 billion at year-end 2010 and $2.3 billion at year-end 2009.  

We believe that the pre-tax PV-10 value of the estimated cash flows related to our estimated proved reserves is a useful supplemental disclosure to the after-tax PV-10 value.  While pre-tax PV-10 is based on prices, costs and discount factors that are comparable from company to company, the after-tax PV-10 is dependent on the unique tax situation of each individual company.  We understand that securities analysts use pre-tax PV-10 as one measure of the value of a company’s current proved reserves and to compare relative values among peer companies without regard to income taxes.  We refer you to Note 4 in the consolidated financial statements for a discussion of our standardized measure of discounted future cash flows related to our proved gas and oil reserves, to the risk factor “Although our estimated natural gas and oil reserve data is independently audited, our estimates may still prove to be inaccurate” in Item 1A of Part I of this Form 10-K, and to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Statement about Forward-Looking Statements” in Item 7 of Part II of this Form 10-K for a discussion of the risks inherent in utilization of standardized measures and estimated reserve data.

Approximately 100% of our year-end 2011 and 2010 estimated proved reserves were natural gas and 55% were classified as proved developed, compared to 100% and 54%, respectively, in 2009.  We operate approximately 96% of our reserves, based on the pre-tax PV-10 value of our proved developed producing reserves, and our reserve life index approximated 11.8 years at year-end 2011.  Sales of natural gas production accounted for nearly 100% of total operating revenues for this segment in 2011, 99% in 2010 and 100% in 2009.

The following table provides an overall and by category summary of our oil and natural gas reserves, as of fiscal year-end 2011 based on average fiscal year prices, and our well count, net acreage and PV-10 as of December 31, 2011 and sets forth 2011 annual information related to production and capital investments for each of our operating areas:

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2011 PROVED RESERVES BY CATEGORY AND SUMMARY OPERATING DATA

			Ark-La-Tex
	Fayetteville	Marcellus	East	Arkoma	New
	Shale Play	Shale Play	Texas	Basin	Ventures	Total
Estimated Proved Reserves:
Natural Gas (Bcf):
Developed (Bcf)	2,689	172	220	173	-	3,254
Undeveloped (Bcf)	2,415	170	27	21	-	2,633
	5,104	342	247	194	-	5,887
Crude Oil (MMBbls):
Developed (MMBbls)	-	-	1	-	-	1
Undeveloped (MMBbls)	-	-	-	-	-	-
	-	-	1	-	-	1
Total Proved Reserves (Bcfe)(1):
Proved Developed (Bcfe)	2,689	172	226	173	-	3,260
Proved Undeveloped (Bcfe)	2,415	170	27	21	-	2,633
	5,104	342	253	194	-	5,893
Percent of Total	87%	6%	4%	3%	-	100%
Percent Proved Developed	53%	50%	89%	89%	-	55%
Percent Proved Undeveloped	47%	50%	11%	11%	-	45%
Production (Bcfe)	436.8	23.4	23.5	16.3	-	500.0
Capital Investments (millions)(2)	$            1,347	$               332	$                 68	$                   8	$               201	$            1,956
Total Gross Producing Wells	2,735	30	602	1,185	-	4,552
Total Net Producing Wells	1,856	22	459	574	-	2,911
Total Net Acreage	800,786(3)	186,893(4)	91,082(5)	319,550(6)	3,600,314(7)	4,998,625
Net Undeveloped Acreage	360,473(3)	180,676(4)	27,281(5)	138,191(6)	3,600,314(7)	4,306,935
PV-10:
Pre-tax (millions)(8)	$            3,806	$               511	$               260	$               226	$                    -	$            4,803
PV of taxes (millions)(8)	1,071	144	73	64	-	1,352
After-tax (millions)(8)	$            2,735	$               367	$               187	$               162	$                    -	$            3,451
Percent of Total	79%	11%	5%	5%	-	100%
Percent Operated(9)	96%	99%	98%	87%	-	96%

 (1)

We have no reserves from synthetic gas, synthetic oil or nonrenewable natural resources intended to be upgraded into synthetic gas or oil. Our proved reserves increased by 1,459.4 Bcfe as a result of our drilling program and net upward revisions of 33.7 Bcfe in 2011.  Of the reserve additions, 611.6 Bcfe were proved developed and 847.8 Bcfe were proved undeveloped.  We used standard engineering and geoscience methods, or a combination of methodologies in determining estimates of material properties, including performance and test date analysis offset statistical analogy of performance data, volumetric evaluation, including analysis of petrophysical parameters (including porosity, net pay, fluid saturations (i.e., water, oil and gas) and permeability) in combination with estimated reservoir parameters (including reservoir temperature and pressure, formation depth and formation volume factors), geological analysis, including structure and isopach maps and seismic analysis, including review of 2-D and 3-D data to ascertain faults, closure and other factors.

(2)

Our Total and Fayetteville Shale play capital investments exclude $21 million related to our drilling rig related equipment, sand facility and other equipment.  

(3)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 2,804 net acres in 2012, 208,563 net acres in 2013, which includes 184,696 net acres held on federal lands, and 23,800 net acres in 2014.

(4)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 58,210 net acres in 2012, 44,551 net acres in 2013 and 10,071 net acres in 2014.

(5)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 380 net acres in 2012, 790 net acres in 2013 and 77 net acres in 2014.

(6)

Includes 123,442 net developed acres and 1,614 net undeveloped acres in the Arkoma Basin that are also within our Fayetteville Shale focus area but not included in the Fayetteville Shale acreage in the table above. Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 30,025 net acres in 2012, 2,181 net acres in 2013 and 31,769 net acres in 2014.

 (7)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years, excluding New Brunswick, Canada and the LSBD area will be 1,200 net acres in 2012, 1,200 net acres in 2013 and 31,600 net acres in 2014.  With regard to the company’s acreage in New Brunswick, Canada, assuming the options are not extended/exercised by March 2013 then, in such event, 2,518,518 net acres will expire in 2013.  With regard to the LSBD acreage, assuming successful wells are not drilled and leases are not extended, leasehold expiring over the next three years will be 15,860 net acres in 2012, 64,120 net acres in 2013 and 228,660 net acres in 2014.

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(8)

Pre-tax PV-10 (a non-GAAP measure) is one measure of the value of a company’s proved reserves that we believe is used by securities analysts to compare relative values among peer companies without regard to income taxes.  The reconciling difference in pre-tax PV-10 and the after-tax PV-10, or standardized measure, is the discounted value of future income taxes on the estimated cash flows from our proved oil and natural gas reserves.

(9)

Based upon pre-tax PV-10 of proved developed producing properties.

We refer you to Note 4 in our consolidated financial statements for a more detailed discussion of our proved gas and oil reserves as well as our standardized measure of discounted future net cash flows related to our proved gas and oil reserves.  We also refer you to the risk factor “Although our estimated natural gas and oil reserve data is independently audited, our estimates may still prove to be inaccurate” in Item 1A of Part I of this Form 10-K and to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Statement about Forward-Looking Statements” in Item 7 of Part II of this Form 10-K for a discussion of the risks inherent in utilization of standardized measures and estimated reserve data.

Proved Undeveloped Reserves

As of December 31, 2011, we had 2,633 Bcfe of proved undeveloped reserves, none of which were proved undeveloped reserves that remain undeveloped for five years or more after initially being disclosed by us.  During 2011, we invested $509.3 million in connection with converting 403.3 Bcfe or 18% of our proved undeveloped reserves as of December 31, 2010 into proved developed reserves and added 847.8 Bcfe of proved undeveloped reserve additions, primarily in the Fayetteville Shale play. Our 2011 proved undeveloped reserve additions are expected to be developed and to begin to generate cash inflows over the next five years.  At December 31, 2010, we had 2,243 Bcfe of proved undeveloped reserves, none of which were proved undeveloped reserves that remained undeveloped for five years or more after initially being disclosed by us.  During 2010, we invested $312.4 million in connection with converting 213.1 Bcfe or 13% of our proved undeveloped reserves as of December 31, 2009 into proved developed reserves and added 733.2 Bcfe of proved undeveloped reserve additions, primarily in the Fayetteville Shale play.

The development of our proved undeveloped reserves will require us to make significant additional investments.  We expect that the development costs for our proved undeveloped reserves of 2,633 Bcfe as of December 31, 2011 will require us to invest an additional $3.4 billion in order for those reserves to be brought to production.  Our ability to make the necessary investments to generate these cash inflows is subject to factors that may be beyond our control.  A significant decrease in price levels for an extended period of time could result in certain reserves no longer being economic to produce, leading to both lower proved reserves and cash flows.  We refer you to the risk factors “A substantial or extended decline in natural gas and oil prices would have a material adverse affect on us,” “We may have difficulty financing our planned capital investments, which could adversely affect our growth” and “Our future level of indebtedness and the terms of our financing arrangements may adversely affect operations and limit our growth” in Item 1A of Part I of this Form 10-K and to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Statement about Forward-Looking Statements” in Item 7 of Part II of this Form 10-K for a more detailed discussion of these factors and other risks.

Our Reserve Replacement

The ability of an E&P company to add new reserves to replace the reserves that are being depleted by its current production volumes is viewed by many investors as an indication of its long-term prospects.  The reserve replacement ratio, which we discuss below, is an important analytical measure used within the E&P industry by investors and peers to evaluate performance results.  There are limitations as to the usefulness of this measure as it does not reflect the type of reserves or the cost of adding the reserves or indicate the potential value of the reserve additions.  Our reserve replacement ratio, including revisions, has averaged over 400% for the three year period ended December 31, 2011, primarily driven by increases in the reserves associated with our Fayetteville Shale play with the development of the Marcellus Shale play in Pennsylvania also contributing in 2011.

In 2011, we replaced 299% of our production volumes with an increase of 1,459.4 Bcfe of proved gas and oil reserves as a result of our drilling program and net upward revisions of 33.7 Bcfe.  Of the reserve additions, 611.6 Bcfe were proved developed and 847.8 Bcfe were proved undeveloped. The upward reserve revisions during 2011 were primarily due to 102.6 Bcf in upward revisions related to the improved performance of wells in our Marcellus Shale play, partially offset by downward performance revisions of 27.5 Bcfe and 18.2 Bcfe in our east Texas and conventional Arkoma Basin operating areas, respectively.  We also had downward performance revisions in our Fayetteville Shale play of 14.0 Bcfe.  Additionally, our reserves decreased by 9.2 Bcfe due to a comparative decrease in the average gas price for 2011 as compared to 2010.  In addition, our reserves decreased by 37.3 Bcfe as a result of our sale of oil and natural gas leases and wells in 2011.

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In 2010, we replaced 430% of our production volumes with an increase of 1,431.1 Bcfe of proved gas and oil reserves as a result of our drilling program and net upward revisions of 309.6 Bcfe.  Of the reserve additions, 698.0 Bcfe were proved developed and 733.2 Bcfe were proved undeveloped. The upward reserve revisions during 2010 were primarily due to 266.7 Bcf in upward revisions related to the improved performance of wells in our Fayetteville Shale play and positive reserve revisions of 78.4 Bcfe due to a comparative increase in the average gas price for 2010 as compared to 2009.  Additionally, we had net upward revisions of 2.7 Bcfe and 34.2 Bcf in our East Texas and conventional Arkoma Basin operating areas, respectively.  Additionally, our reserves decreased by 55.4 Bcfe as a result of our sale of oil and natural gas leases and wells in 2010.

In 2009, our reserve replacement ratio was 592% with an increase of 1,685.2 Bcfe of proved natural gas and oil reserves as a result of our drilling program and net upward revisions of 92.9 Bcfe.  Of the 2009 reserve additions, 757.6 Bcfe were proved developed and 927.5 Bcfe were proved undeveloped. The upward reserve revisions during 2009 were primarily due to 384.8 Bcf in upward revisions related to the improved performance of wells in our Fayetteville Shale play, partially offset by downward reserve revisions of 251.5 Bcf due to a comparative decrease in the average gas price for 2009 as compared to year-end 2008.  Additionally, we had downward performance revisions of 25.5 Bcfe and 15.1 Bcf in our East Texas and conventional Arkoma Basin operating areas, respectively.

For the period ending December 31, 2011, our three-year average reserve replacement ratio, including revisions, was 416%. Our reserve replacement ratio for 2011, excluding the effect of reserve revisions, was 292%, compared to 354% in 2010 and 561% in 2009. Excluding reserve revisions, our three-year average reserve replacement ratio is 380%.

Since 2005, the substantial majority of our reserve additions have been generated from our drilling program in the Fayetteville Shale play.  We expect our drilling programs in the Fayetteville Shale and Marcellus Shale plays to continue be the primary source of our reserve additions in the future; however, our ability to add reserves depends upon many factors that are beyond our control.  We refer you to the risk factors “Our drilling plans for the Fayetteville Shale and Marcellus Shale plays are subject to change” and “Our exploration, development and drilling efforts and our operation of our wells may not be profitable or achieve our targeted returns” in Item 1A of Part I of this Form 10-K and to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Statement about Forward-Looking Statements” in Item 7 of Part II of this Form 10-K for a more detailed discussion of these factors and other risks.

Our Operations

Fayetteville Shale Play

Our Fayetteville Shale play is currently a primary focus of our E&P business. The Fayetteville Shale is a Mississippian-age unconventional gas reservoir located on the Arkansas side of the Arkoma Basin, ranging in thickness from 50 to 550 feet and ranging in depth from 1,500 to 6,500 feet.  The Barnett Shale found in north Texas is an analogous reservoir.  At December 31, 2011, we held leases for approximately 925,842 net acres in the play area (360,473 net undeveloped acres, 440,313 net developed acres held by Fayetteville Shale production, 123,442 net developed acres held by conventional production and the remainder in the traditional Fairway portion of the Arkoma Basin), compared to approximately 915,884 net acres at year-end 2010 and 888,695 net acres at year-end 2009.

Approximately 5,104 Bcf of our reserves at year-end 2011 were attributable to our Fayetteville Shale play, compared to approximately 4,345 Bcf at year-end 2010 and 3,117 Bcf at year-end 2009.  Gross production from our operated wells in the Fayetteville Shale play increased from approximately 1,635 MMcf per day at the beginning of 2011 to approximately 1,947 MMcf per day by year-end.  Our net production from the Fayetteville Shale play was 436.8 Bcf in 2011, compared to 350.2 Bcf in 2010 and 243.5 Bcf in 2009. In 2012, we estimate our production from the Fayetteville Shale play will be in the range of 465 to 470 Bcf.

At year-end 2011, approximately 74% of our 597,482 total net leasehold acres in the Fayetteville Shale was held by production, excluding our acreage in the traditional Fairway and the federal acreage we hold in the Ozark Highlands Unit.  For more information about our acreage and well count, we refer you to “Properties” in Item 2 of Part 1 of this Form 10-K.   Excluding our acreage in the traditional Fairway, our acreage position was obtained at an average cost of approximately $253 per acre and has an average royalty interest of 15%.  In 2012, we will earn 2 sections or approximately 500 net acres, representing less than 1% of our drilling program.   As of December 31, 2011, excluding our acreage in the traditional Fairway and our federal acreage, the undeveloped portion of our acreage had an average remaining lease term of 2 years.  

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 We refer you to the risk factor “If we fail to drill all of the wells that are necessary to hold our acreage, the initial lease terms could expire, which would result in the loss of certain leasehold rights” in Item 1A of Part I of this Form 10-K. 

As of December 31, 2011, we had spud a total of 3,095 wells in the play since its commencement in 2004, 2,581 of which were operated by us and 514 of which were outside-operated wells.  Of the wells spud, 650 were in 2011, 658 were in 2010 and 570 were in 2009.  Of the wells spud in 2011, 649 were designated as horizontal wells.  At year-end 2011, 2,380 operated wells had been drilled and completed overall, including 2,290 horizontal wells.  Of the 2,290 horizontal wells, 2,272 wells were fracture stimulated using either slickwater or crosslinked gel stimulation treatments, or a combination thereof.

Over the past several years, we have seen continual improvement in our drilling practices in the Fayetteville Shale play.  Our operated horizontal wells had an average completed well cost of $2.8 million per well, average horizontal lateral length of 4,836 feet and average time to drill to total depth of 8 days from re-entry to re-entry in 2011.  This compares to an average completed operated well cost of $2.8 million per well, average horizontal lateral length of 4,528 feet and average time to drill to total depth of 11 days from re-entry to re-entry during 2010.  In 2009, our average completed operated well cost was $2.9 million per well with an average horizontal lateral length of 4,100 feet and average time to drill to total depth of 12 days from re-entry to re-entry.  The operated wells we placed on production during 2011 averaged initial production rates of 3,330 Mcf per day, compared to average initial production rates of 3,364 Mcf per day in 2010 and 3,478 Mcf per day in 2009.  The decrease in initial production rates in 2011 and 2010 are primarily due to increased well density and locational differences in the mix of wells.  During 2011, we placed 51 operated wells on production with initial production rates that exceeded 5.0 MMcf per day, including 6 wells that exceeded 6.0 MMcf per day.

Beginning in late 2008 and continuing through 2011, we drilled a significant number of wells to test tighter well spacing. At December 31, 2011, we had placed 1,123 wells on production that have well spacing of 700 feet or less, representing approximately 65-acre spacing or less. Early production performance from recent well spacing tests suggests that there are areas of the field that may be economically developed at tighter spacing depending on market conditions.

Our total proved net reserves booked in the play at year-end 2011 were from a total of 4,376 locations, of which 2,735 were proved developed producing, 59 were proved developed non-producing and 1,582 were proved undeveloped.  Of the 4,376 locations, 4,310 were horizontal. The average gross proved reserves for the undeveloped wells included in our year-end 2011 and 2010 reserves was approximately 2.4 Bcf per well, compared to 2.2 Bcf per well at year-end 2009.  Total proved net gas reserves booked in the play in 2010 totaled approximately 4,345 Bcf from a total of 3,682 locations, of which 2,120 were proved developed producing, 36 were proved developed non-producing and 1,526 were proved undeveloped.  Total proved net gas reserves booked in the play in 2009 totaled approximately 3,117 Bcf from a total of 2,675 locations, of which 1,428 were proved developed producing, 97 were proved developed non-producing and 1,150 were proved undeveloped.  If the Fayetteville Shale play continues to be successfully developed, we expect a continued significant level of proved reserves in the Fayetteville Shale play over the next few years.

In 2011, we invested approximately $1.3 billion in our Fayetteville Shale play, which included approximately $1.2 billion to spud 650 wells, 580 of which we operated.  We increased our reserves in the Fayetteville Shale play by 1,196 Bcf, which included net downward reserve revisions of 15 Bcf due primarily to well performance of 14 Bcf and downward price revisions of 1 Bcf.  Included in our total capital investments in the play during 2011 was $132 million in capitalized costs and other expenses and $10 million for acquisition of properties.  In 2010, we invested approximately $1.3 billion in our Fayetteville Shale play, which included $1.2 billion to spud 658 wells, $48 million for acquisition of properties, and $111 million in capitalized costs and other expenses.  In 2009, we invested approximately $1.3 billion in our Fayetteville Shale play, which included $1.1 billion to spud 570 wells, $40 million for acquisition of properties, $22 million for seismic and $106 million in capitalized costs and other expenses.  At December 31, 2011, we had acquired approximately 1,324 square miles of 3-D seismic data, which provides us with seismic data on approximately 65% of our net acreage position in the Fayetteville Shale, excluding our acreage in the traditional Fairway portion of the Arkoma Basin.

In 2012, we plan to invest approximately $1.1 billion in our Fayetteville Shale play, which includes participating in approximately 460 to 470 gross wells, 425 to 435 of which are planned to be operated by us.  

We believe that our Fayetteville Shale acreage continues to have significant development potential.  Our strategy going forward is to increase our production through development drilling, increase the amount of acreage we hold by production and determine the economic viability of the undrilled portion of our acreage.  Our drilling program with respect to our Fayetteville Shale play is flexible and will be impacted by a number of factors, including the results of our horizontal drilling efforts, our ability to determine the most effective and economic fracture stimulation methods and well spacing, the extent to which we can replicate the results of our most successful Fayetteville Shale wells in other Fayetteville Shale acreage and the natural gas commodity price environment.  As we continue to gather data about the

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Fayetteville Shale, it is possible that additional information may cause us to alter our drilling schedule or determine that prospects in some portion of our acreage position should not be pursued at all. We refer you to the risk factor “Our drilling plans are subject to change” in Item 1A of Part I of this Form 10-K.

Marcellus Shale Play

We began leasing in northeastern Pennsylvania in 2007 in an effort to gain a position in the emerging Marcellus Shale play.  At December 31, 2011, we had approximately 186,893 net acres in Pennsylvania under which we believe the Marcellus Shale is prospective (180,676 net undeveloped acres and 6,217 net developed acres held by production), compared to approximately 173,009 net acres at year-end of 2010 and 149,317 net acres at year-end 2009.  The increase in our acreage during 2011 and 2010 was primarily due to the acquisition of additional leasehold.  Our undeveloped acreage position as of December 31, 2011 had an average remaining lease term of 2 years, an average royalty interest of 13% and was obtained at an average cost of approximately $1,077 per acre.  

As of year-end 2011, we had spud 70 wells, 23 of which were on production and 67 of which were horizontal wells.  In 2011, we invested approximately $332 million in the Marcellus Shale, which included approximately $214 million to participate in 45 wells, of which 8 are on production and 37 were in progress at year-end.  Of these 45 wells, 18 were horizontal wells located in our Greenzweig area in Bradford County and the remaining 27 wells were located in our Price and Range Trust areas in Susquehanna County.  At December 31, 2011, the Company had 22 operated horizontal wells on production which had an average completed well cost of $6.4 million per well, average horizontal lateral length of 4,007 feet and an average of 12 fracture stimulation stages.  Included in our total capital investments in the play during 2011 was approximately $77 million for acquisition of properties, $13 million for seismic and $29 million in capitalized costs and other expenses.  In 2011, we began the year drilling with one operated rig in Pennsylvania and ended the year with two operated rigs.

Approximately 342 Bcf of our total proved net reserves at year-end 2011 were attributable to the Marcellus Shale.  The company had a total of 22 operated horizontal wells and 1 operated vertical well which were on production at December 31, 2011, resulting in net production from this area of 23.4 Bcf in 2011, compared to 1.0 Bcf in 2010.Our reserves booked in the Marcellus Shale included a total of 60 locations, of which 30 were proved developed producing, 2 were proved developed non-producing and 28 were proved undeveloped.  The average gross proved reserves for the undeveloped wells included in our year-end reserves was approximately 7.5 Bcf per well, up from 3.0 per well at year-end 2010.  In 2010, we invested approximately $118 million in the Marcellus Shale and participated in 21 wells, resulting in net production of 1.0 Bcf and adding new reserves of 38 Bcf. In 2009, we invested approximately $40 million in the Marcellus Shale, substantially all of which was for the acquisition of properties.

In 2012, we plan to invest approximately $526 million.  We expect to end the year with four operated rigs and participate in a total of 80 to 85 gross wells in 2012, all of which will be operated by us. In 2012, we estimate our production from the Marcellus Shale play will be in the range of 60 to 65 Bcf.  Our ability to bring our Marcellus Shale production to market will depend on a number of factors including the construction of and/or the availability of capacity on gathering systems and pipelines that we do not own.  We refer you to “Midstream Services — Gas Marketing” for a discussion of our gathering and transportation arrangements for the Marcellus Shale production and to the risk factor “Our ability to sell our natural gas and oil and/or to receive market prices for our production may be adversely affected by constraints or interruptions on gathering systems, pipelines, processing and transportation systems owned or operated by us or others.” in Item 1A of Part I of this Form 10-K.  

We believe that our Marcellus Shale acreage has significant development potential. Our drilling program with respect to our Marcellus Shale play is flexible and will be impacted by a number of factors, including the results of our horizontal drilling efforts, our ability to determine the most effective and economic fracture stimulation methods and well spacing and the natural gas commodity price environment. As we continue to gather data about the Marcellus Shale, it is possible that additional information may cause us to alter our drilling schedule or determine that prospects in some portion of our acreage position should not be pursued at all. We refer you to the risk factor “Our drilling plans are subject to change” in Item 1A of Part I of this Form 10-K.

Ark-La-Tex

Our Ark-La-Tex division includes our conventional assets in the Arkoma Basin in Arkansas and Oklahoma and our conventional and unconventional assets in East Texas.  Production from these assets was 39.8 Bcfe in 2011, compared to 53.5 Bcfe in 2010 and 56.9 Bcfe in 2009.  The decline in production from these areas during 2011 and 2010 was primarily driven by asset dispositions as well as natural field production declines and lower capital investments in these areas since

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2009.  In May 2011, we sold the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 9,717 net acres for approximately $118.1 million.  In June 2010, we sold the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 20,063 net acres for approximately $357.8 million.  We expect these sales, together with our planned decrease in capital investments and the natural production decline in existing wells, to decrease our net production from East Texas in 2012.  In 2011, we invested approximately $76 million in East Texas and Arkoma and participated in 10 wells, adding new reserves of 19 Bcfe.  Total proved net reserves from these areas were approximately 447 Bcfe at December 31, 2011, compared to 554 Bcfe at year-end 2010 and 538 Bcfe at year-end 2009.  In 2012, we expect to invest approximately $18 million combined in our East Texas and Conventional Arkoma Basin programs.

New Ventures

We actively seek to find and develop new oil and natural gas plays with significant exploration and exploitation potential, which we refer to as “New Ventures.” We have been focusing on both oil and gas unconventional plays, and the technological methods best suited to developing these plays, such as horizontal drilling and fracture stimulation techniques. New Ventures prospects are evaluated based on repeatability, multi-well potential and land availability as well as other criteria and may be located both inside and outside of the United States. As of December 31, 2011, we held 3,600,314 net undeveloped acres in connection with our New Ventures prospects, of which 2,518,518 net acres were located in New Brunswick, Canada and 520,619 net acres related to the Lower Smackover Brown Dense (LSBD) in southern Arkansas and northern Louisiana. This compares to 3,009,643 net undeveloped acres held at year-end 2010, of which 2,518,518 net acres were located in New Brunswick, Canada, and 36,125 net undeveloped acres held at year-end 2009.

In 2010, we successfully bid for exclusive licenses from the Department of Natural Resources of the Province of New Brunswick, Canada to search and conduct an exploration program covering over 2,518,518 net acres in the province in order to test new hydrocarbon basins. As a condition under our licenses, we are required to make investments of approximately $47 million USD in the province by March 31, 2013. During 2011 and 2010, we conducted airborne gravity and magnetics surveys, surface geochemistry surveys and, as of December 31, 2011, had acquired 248 miles of 2-D seismic data. While preliminary interpretation has already begun, in 2012 we intend to continue our acquisition of approximately 130 additional miles of 2-D seismic data and plan to drill two stratigraphic well tests in the fourth quarter of 2012. Through December 31, 2011, we have invested approximately $24.0 million in our New Brunswick exploration program, which represents our first venture outside of the United States.

In July 2011, we announced that we would begin testing a new unconventional horizontal oil play targeting the LSBD formation, an unconventional oil reservoir that ranges in vertical depths from 8,000 to 11,000 feet and appears to be laterally extensive over a large area ranging in thickness from 300 to 550 feet. At December 31, 2011, we held approximately 520,619 net undeveloped acres in the area, obtained at an average cost of $375 per acre.  Our leases currently have an 82% average net revenue interest and an average primary lease term of 4 years, which may be extended for an additional 4 years. The LSBD formation is an Upper Jurassic age, kerogen-rich carbonate source rock found across the Gulf Coast region of the southern United States from Texas to Florida. We extensively reviewed the LSBD across the region and believe that the right mix of reservoir depth, thickness, porosity, matrix permeability, sealing formations, thermal maturity and oil characteristics are found in our leased areas and that the formation compares favorably to other productive oil plays in the United States. In February 2012, we completed our first well in the play area, the Roberson 18-19 #1-15H located in Columbia County, Arkansas, at a total depth of approximately 9,369 feet and a horizontal lateral length of approximately 3,600 feet. Our second well, the Garrett 7-23-5H #1 located in Claiborne Parish, Louisiana, was drilled to a vertical depth in February 2012 at approximately 10,863 feet with a 6,536-foot horizontal lateral and is expected to be completed in March 2012.  If our drilling program yields positive results, we expect that activity in the play could increase significantly over the next several years.

While we believe that our New Ventures projects have significant exploration and exploitation potential, there can be no assurance that all prospects will result in viable projects or that we will not abandon our initial investments.  We refer you to the risk factors “The success of our New Ventures projects is subject to drilling and completion technique risks and enhanced recovery methods.  Our drilling results may not meet our expectations for reserves or production and the value of our undeveloped acreage could decline,” and  “Our exploration, development and drilling efforts and our operation of our wells may not be profitable or achieve our targeted returns” in Item 1A of Part I of this Form 10-K.

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Divestitures

In May 2011, we sold certain oil and natural gas leases, wells and gathering equipment in East Texas for approximately $118.1 million.  The sale included only the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 9,717 net acres. The net production from the Haynesville and Middle Bossier Shale intervals in this acreage was approximately 7.0 MMcf per day and proved net reserves were approximately 37.1 Bcf when the sale was closed in May 2011.

In June 2010, we sold certain oil and natural gas leases, wells and gathering equipment in East Texas for approximately $357.8 million.  The sale included only the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 20,063 net acres. The net production from the Haynesville and Middle Bossier Shale intervals in this acreage was approximately 13.5 MMcf per day and proved net reserves were approximately 55.4 Bcf when the sale was closed in June 2010.  

Capital Investments

During 2011, we invested a total of $2.0 billion in our E&P business and participated in drilling 708 wells, 447 of which were successful, and 261 which were in progress at year-end.  Of the 261 wells in progress at year-end, 214 were located in our Fayetteville Shale play.  Of the approximately $2.0 billion invested in our E&P business in 2011, approximately $1.3 billion was invested in our Fayetteville Shale play, $332 million in our Marcellus Shale play, $68 million in East Texas, $8 million in our conventional Arkoma Basin program and $201 million in New Ventures projects.

Of the $2.0 billion invested in 2011, approximately $1.5 billion was invested in exploratory and development drilling and workovers, $227 million for acquisition of properties, $30 million for seismic expenditures and $199 million in capitalized interest and other expenses.  Additionally, we invested approximately $21 million in our drilling rig related equipment, sand facility and other equipment.  In 2010, we invested approximately $1.8 billion in our primary E&P business activities and participated in drilling 713 wells. Of the $1.8 billion invested in 2010, approximately $1.4 billion was invested in exploratory and development drilling and workovers, $200 million for acquisition of properties, $17 million for seismic expenditures and $172 million in capitalized interest and expenses and other technology-related expenditures. Additionally, we invested approximately $13 million in our drilling rig related equipment, sand facility, and other equipment.  In 2009, we invested approximately $1.6 billion in our primary E&P business activities and participated in drilling 750 wells. Of the $1.6 billion invested in 2009, approximately $1.3 billion was invested in exploratory and development drilling and workovers, $82 million for acquisition of properties, $32 million for seismic expenditures and $155 million in capitalized interest and expenses and other technology-related expenditures.  Additionally, we invested approximately $35 million in drilling rig related and ancillary equipment.    

In 2012, we plan to invest approximately $1.8 billion in our E&P program and participate in drilling 555 to 565 gross wells, 510 to 530 of which are planned to be operated by us.  The Fayetteville Shale play will be the primary focus of our capital investments, with planned investments of approximately $1.1 billion.  Our planned 2012 capital investments also include approximately $526 million associated with increased Marcellus Shale play activity, $177 million in unconventional, exploration and New Ventures projects and $18 million combined investments in East Texas and our conventional drilling program in the Arkoma Basin.  

Of the $1.8 billion allocated to our 2012 E&P capital budget, approximately $1.5 billion will be invested in development and exploratory drilling, $20 million in seismic and other geological and geophysical expenditures, $75 million in acquisition of properties and $300 million in capitalized interest and expenses as well as equipment, facilities and technology-related expenditures.  We refer you to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital Investments” for additional discussion of the factors that could impact our planned capital investments in 2012.

Sales, Delivery Commitments and Customers

Sales. Our daily natural gas equivalent production averaged 1,370.0 MMcfe in 2011, compared to 1,108.8 MMcfe in 2010 and 823.1 MMcfe in 2009.  Total natural gas equivalent production was 500.0 Bcfe in 2011, up from 404.7 Bcfe in 2010 and 300.4 Bcfe in 2009.  Our natural gas production was 499.4 Bcf in 2011, compared to 403.6 Bcf in 2010 and 299.7 Bcf in 2009.  The increase in production in 2011 resulted primarily from a 86.6 Bcf increase in net production from our Fayetteville Shale play and a 22.4 Bcf increase in net production from our Marcellus Shale play, which more than offset a combined 13.7 Bcfe decrease in net production from our East Texas and Arkoma Basin properties.  The increase in

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production in 2010 resulted primarily from a 106.7 Bcf increase in production from the Fayetteville Shale play and an increase in our East Texas production, which more than offset a combined 3.4 Bcfe decrease in net production from our East Texas and Arkoma Basin properties.  We also produced 97,000 barrels of oil in 2011, compared to 171,000 barrels of oil in 2010 and 124,000 barrels of oil in 2009.  Our oil production has decreased between 2011 and 2010 primarily due to the natural production decline in existing wells.  For 2012, we are targeting total natural gas and crude oil production of approximately 560 to 570 Bcfe, which represents a growth rate of approximately 13% over our 2011 production volumes, using midpoints.

Sales of natural gas and oil production are conducted under contracts that reflect current prices and are subject to seasonal price swings. We are unable to predict changes in the market demand and price for natural gas, including changes that may be induced by the effects of weather on demand for our production.  We periodically enter into various hedging and other financial arrangements with respect to a portion of our projected natural gas and crude oil production in order to support certain desired levels of cash flow and to minimize the impact of price fluctuations.  Our policies prohibit speculation with derivatives and limit swap agreements to counterparties with appropriate credit standings. At December 31, 2011, we had NYMEX commodity price hedges in place on 266.4 Bcf, or approximately 47% of our targeted 2012 natural gas production and 185.2 Bcf of our expected 2013 natural gas production.  We intend to hedge additional future production volumes to the extent natural gas prices rise to levels that we believe will achieve certain desired levels of cash flow.  We refer you to Item 7A of this Form 10-K, “Quantitative and Qualitative Disclosures about Market Risks,” for further information regarding our hedge position at December 31, 2011.

Including the effect of hedges, we realized an average wellhead price of $4.19 per Mcf for our natural gas production in 2011, compared to $4.64 per Mcf in 2010 and $5.30 per Mcf in 2009.  Our hedging activities increased our average gas price $0.63 per Mcf in 2011, increased our average gas price $0.71 per Mcf in 2010 and increased our average price $1.96 per Mcf in 2009.  Our average oil price realized was $94.08 per barrel in 2011, compared to $76.84 per barrel in 2010 and $54.99 per barrel in 2009.  None of our crude oil production was hedged during 2011, 2010 or 2009.  

During 2011, the average price received for our natural gas production, excluding the impact of hedges, was approximately $0.48 Mcf lower than average NYMEX prices.  Assuming a NYMEX commodity price for 2012 of $3.00 per Mcf of natural gas, the average price received for our natural gas production is expected to be approximately $0.15 to $0.20 per Mcf below the NYMEX Henry Hub average settlement price, including the impact of our basis hedges. Our E&P segment receives a sales price for our natural gas at a discount to NYMEX settlement prices due to locational basis differentials, while transportation charges and fuel charges also reduce the price received.  In 2012, we expect to pay average third-party transportation charges in the range of $0.25 to $0.30 per Mcf and average fuel charges in the range of 0.50% to 1.00% of our sales price for natural gas. In 2012, we expect to receive an average natural gas sales price of approximately $0.45 to $0.55 less than the average NYMEX settlement price.

Delivery Commitments. As of February 1, 2012, we had natural gas delivery commitments of 228 Bcf in 2012 and 41 Bcf in 2013 under existing agreements.  These commitments require the delivery of natural gas in Arkansas, Pennsylvania and Texas.   These amounts are well below our forecasted 2012 and anticipated 2013 production from our available reserves in our Fayetteville Shale, Marcellus Shale and East Texas operations, which are not subject to any priorities or curtailments that may affect quantities delivered to our customers or any priority allocations or price limitations imposed by federal or state regulatory agencies, or any other factors beyond our control that may affect our ability to meet our contractual obligations other than those discussed in Item 1A. “Risk Factors.”  We expect to be able to fulfill all of our short-term or long-term contractual obligations to provide natural gas from our own production of available reserves, however, if we are unable to do so, we may have to purchase natural gas at market to fulfill our obligations.

Customers. Our customers include major energy companies, utilities and industrial consumers of natural gas. During the years ended December 31, 2011, 2010 and 2009, no single third-party customer accounted for 10% or more of our consolidated revenues.

Impact of Federal Regulation of Sales of Natural Gas and Oil

Historically, the sale of natural gas in interstate commerce has been regulated pursuant to the Natural Gas Act of 1938, or the NGA, the Natural Gas Policy Act of 1978, or the NGPA, and regulations promulgated thereunder by the Federal Energy Regulatory Commission, or the FERC.  In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act, or the Decontrol Act.  The Decontrol Act removed all NGA and NGPA price and non-price controls affecting wellhead sales of natural gas effective January 1, 1993 and sales by producers of natural gas can be made at uncontrolled market prices.  

The natural gas industry historically has been heavily regulated and from time to time proposals are introduced by Congress and the FERC and judicial decisions are rendered that impact the conduct of business in the natural gas industry.  

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There can be no assurance that the current, less stringent regulatory approach pursued by the FERC and Congress will continue. We refer you to “Other Items — Environmental Matters” and the risk factor “We incur substantial costs to comply with government regulations, especially regulations relating to environmental protection, and could incur even greater costs in the future” in Item 1A of Part I of this Form 10-K for a discussion of the impact of government regulation on our business.

Competition

All phases of the oil and natural gas industry are highly competitive.  We compete in the acquisition of properties, the search for and development of reserves, the production and sale of natural gas and oil and the securing of labor and equipment required to conduct our operations.  Our competitors include major oil and natural gas companies, other independent oil and natural gas companies and individual producers and operators.  Many of these competitors have financial and other resources that substantially exceed those available to us.

Competition in Arkansas has increased in recent years due largely to the development of improved access to interstate pipelines and our discovery of the Fayetteville Shale play. While improved intrastate and interstate pipeline transportation in Arkansas should increase our access to markets for our natural gas production, these markets will also be served by a number of other suppliers.  Consequently, we will encounter competition that may affect both the price we receive and contract terms we must offer. Outside Arkansas, we are less established and face competition from a larger number of other producers.

Commencing in 1992, the FERC issued a series of orders (collectively, “Order No. 636”), which require interstate pipelines to provide transportation separately, or “unbundled,” from the pipelines’ sales of natural gas.  Order No. 636 also requires pipelines to provide open-access transportation on a basis that is equal for all shippers.  Although Order No. 636 does not directly regulate our activities, the FERC has stated that it intends for Order No. 636 to foster increased competition within all phases of the natural gas industry.  Starting in 2000, the FERC issued a series of orders (collectively, “Order No. 637”), which imposed a number of additional reforms designed to enhance competition in natural gas markets.  Among other things, Order No. 637 revised the FERC pricing policy by waiving price ceilings for short-term released capacity for a two-year period, and effected changes in FERC regulations relating to scheduling procedures, capacity segmentation, pipeline penalties, rights of first refusal and information reporting.  The implementation of these orders has not had a material adverse effect on our results of operations to date.

We cannot predict whether and to what extent any market reforms initiated by the FERC or any new energy legislation will achieve the goal of increasing competition, lessening preferential treatment and enhancing transparency in markets in which our natural gas is sold.  However, we do not believe that we will be disproportionately affected as compared to other natural gas producers and marketers by any action taken by the FERC or any other legislative body.

Regulation of Hydraulic Fracturing

We utilize hydraulic fracturing in our E&P operations as a means of maximizing the productivity of our wells.  It is an essential and common practice in the oil and gas industry used to stimulate production of oil, natural gas, and associated liquids from dense subsurface rock formations. The knowledge and expertise in fracturing techniques we have developed through our operations in the Fayetteville Shale play are being utilized in our other operating areas, currently including our Marcellus Shale acreage and, in the near future, expected to include our exploration programs in New Brunswick, Canada. Successful hydraulic fracturing techniques are also expected to be critical to the development of our recently announced unconventional horizontal oil play targeting the LSBD formation in Arkansas and Louisiana.  Hydraulic fracturing involves using water, sand, and certain chemicals to fracture the hydrocarbon-bearing rock formation to allow the flow of hydrocarbons into the wellbore. In our Fayetteville Shale play, the fracturing fluids we use are comprised of over 99.9% water and sand. The remaining 0.1% is comprised of small quantities of additives which contain chemical compounds such as hydrochloric acid, citric acid, glutaraldehyde and sodium chloride which is used in common household products.

In the past few years, there has been an increased focus on environmental aspects of hydraulic fracturing practices in the United States and Canada.  In the United States, hydraulic fracturing is typically regulated by state oil and natural gas commissions but there have recently been a number of regulatory initiatives at the federal and local levels as well as by other state agencies.

The Environmental Protection Agency (the “EPA”) has asserted federal regulatory authority over certain hydraulic fracturing activities involving diesel under the Safe Drinking Water Act and has begun the process of drafting guidance documents related to this newly asserted regulatory authority. In addition, in July 2011, the EPA issued proposed rules that

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would subject all oil and gas operations (production, processing, transmission, storage and distribution) to regulation under the New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAPS) programs. The EPA proposed rules also include NSPS standards for completions of hydraulically fractured gas wells. These standards include the reduced emission completion (REC) techniques developed in the EPA's Natural Gas STAR program. The standards would be applicable to newly drilled and fractured wells as well as existing wells that are refractured. Further, the proposed regulations under NESHAPS include maximum achievable control technology (MACT) standards for those glycol dehydrators and storage vessels at major sources of hazardous air pollutants not currently subject to MACT standards. Final action on the proposed rules is expected no later than February 28, 2012. We are currently evaluating the effect these proposed rules could have on our business.

In October 2011, the EPA also announced a schedule for development of standards for disposal of wastewater produced from shale gas operations to publicly owned treatment works (POTWs). The regulations will be developed under the EPA's Effluent Guidelines Program under the authority of the Clean Water Act. The EPA anticipates issuing the proposed rules in 2014.

In addition to the EPA’s efforts, legislation has been introduced before Congress, called the Fracturing Responsibility and Awareness of Chemicals Act, to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process. There are also certain governmental reviews either underway or being proposed that focus on environmental aspects of hydraulic fracturing practices. A number of federal agencies are analyzing, or have been requested to review, a variety of environmental issues associated with hydraulic fracturing. The EPA has commenced a study of the potential environmental effects of hydraulic fracturing on drinking water and groundwater, with initial results expected to be available by late 2012 and final results by 2014. In addition, the U.S. Department of Energy is conducting an investigation into practices the agency could recommend to better protect the environment from drilling using hydraulic fracturing completion methods. Also, the U.S. Department of the Interior is considering disclosure requirements or other mandates for hydraulic fracturing on federal lands.

Certain states in which we operate, including Arkansas, Pennsylvania and Texas, have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, public disclosure, waste disposal and well construction requirements on hydraulic fracturing operations or otherwise seek to ban fracturing activities altogether.  In addition to state laws, local land use restrictions, such as city ordinances, may restrict or prohibit the performance of well drilling in general and/or hydraulic fracturing in particular. In the event state, local, or municipal legal restrictions are adopted in areas where we are currently conducting, or in the future plan to conduct operations, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and perhaps even be precluded from the drilling and/or completion of wells.

In the Province of New Brunswick in Canada there are presently no hydraulic fracturing regulations but there has been increased attention on developing a regulatory framework.

Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition, including litigation, to oil and gas production activities using hydraulic fracturing techniques. Additional legislation or regulation could also lead to operational delays or increased operating costs in the production of oil, natural gas, and associated liquids including from the development of shale plays, or could make it more difficult to perform hydraulic fracturing. The adoption of additional federal, state or local laws or the implementation of regulations regarding hydraulic fracturing could potentially cause a decrease in the completion of new oil and gas wells, increased compliance costs and time, which could adversely affect our financial position, results of operations and cash flows. We refer you to the risk factor “Our financial condition and results of operation could be adversely affected by proposed federal and state legislative and regulatory initiatives relating to hydraulic fracturing that could result in increased costs and additional operating restrictions or delays or prevent us realizing the value of undeveloped acreage” in Item 1A of Part I of this Form 10-K.

Midstream Services

Our Midstream Services segment is well-positioned to complement our E&P initiatives and to compete with other midstream providers for unaffiliated business.  We generate revenue from gathering fees associated with the transportation of natural gas to market and through the marketing of natural gas.  Our gathering assets support our E&P operations and are currently concentrated in our Fayetteville Shale play in Arkansas and our Marcellus Shale play in Pennsylvania.

Our operating income from this segment was $248.0 million on revenues of $2.9 billion in 2011, compared to $191.6 million on revenues of $2.5 billion in 2010 and $122.6 million on revenues of $1.6 billion in 2009.  Revenues increased in

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2011 and 2010 primarily due to increased gathering revenues and increased volumes marketed.  EBITDA generated by our Midstream Services segment was $285.1 million in 2011, compared to $220.5 million in 2010 and $141.9 million in 2009.  The increases in 2011 and 2010 operating income and EBITDA were primarily due to increased gathering revenues and marketing margins, partially offset by increased operating costs and expenses.  We expect that the operating income and EBITDA of our Midstream Services segment will increase over the next few years as we continue to develop our Fayetteville Shale acreage and Marcellus Shale acreage positions.  EBITDA is a non-GAAP measure.  We refer you to “Business — Other Items — Reconciliation of Non-GAAP Measures” in Item 1 of Part I of this Form 10-K for a table that reconciles EBITDA to net income (loss) attributable to Southwestern Energy.  

Gas Gathering

We engage in gas gathering activities through our gathering subsidiaries, DeSoto Gathering and Angelina Gathering. DeSoto Gathering engages in gathering activities in Arkansas primarily related to the development of our Fayetteville Shale play.  In 2011, we invested approximately $160.8 million related to these activities and had gathering revenues of $408.2 million, compared to $271.3 million invested and revenues of $316.0 million in 2010 and $214.2 million invested and revenues of $205.6 million in 2009.  

DeSoto Gathering is expanding its network of gathering lines and facilities throughout the Fayetteville Shale play area. During 2011, DeSoto Gathering gathered approximately 703.6 Bcf of natural gas volumes in the Fayetteville Shale play area, including 57.4 Bcf of natural gas from third-party operated wells.  During 2010, DeSoto Gathering gathered approximately 562.6 Bcf of natural gas volumes in the Fayetteville Shale play area, including 56.6 Bcf of natural gas from third-party wells. In 2009, DeSoto Gathering gathered approximately 367.3 Bcf of natural gas volumes in the Fayetteville Shale play area, including 26.9 Bcf of natural gas from third-party wells.  The increase in volumes gathered in over the past three years was primarily due to our growing production volumes from the Fayetteville Shale play.  At the end of 2011, DeSoto Gathering had approximately 1,791 miles of pipe from the individual wellheads to the transmission lines and compression equipment representing in aggregate approximately 526,625 horsepower had been installed at 61 central point gathering facilities in the field.  Our gathering revenues are expected to grow over the next few years largely as a result of increased development of our acreage in the Fayetteville Shale and the increased development activity undertaken by other operators in the play area.

Angelina Gathering currently engages in gathering activities in East Texas and in Pennsylvania.  At year-end 2011, Angelina Gathering had approximately 25 miles of pipe in Texas and 13 miles of pipe in Pennsylvania.  At December 31, 2011, compression equipment representing in aggregate approximately 7,100 horsepower had also been installed at one central point gathering facility in Pennsylvania.  

Our gathering revenues are expected to grow over the next few years largely as a result of increased development of our acreage in the Fayetteville Shale and Marcellus Shale and the increased development activity undertaken by other operators in those areas.

Gas Marketing

Our gas marketing subsidiary, SES, allows us to capture downstream opportunities related to marketing and transportation of natural gas. SES purchases natural gas production and sells it to end-users and manages the basis and marketing portfolio and acquires transportation rights on third party pipelines and gathering lines.  Our current marketing operations primarily relate to the marketing of our own natural gas production and some third-party natural gas.  During 2011, we marketed 611.4 Bcf of natural gas, compared to 495.8 Bcf in 2010 and 382.5 Bcf in 2009.  Of the total volumes marketed, production from our E&P operated wells accounted for 94% in 2011, compared to 95% in 2010 and 92% in 2009.

SES is a “foundation shipper” on two pipeline projects serving the Fayetteville Shale play growth, the Fayetteville Express Pipeline LLC, or FEP, a 2.0 Bcf per day pipeline that is jointly owned by Kinder Morgan Energy Partners, L.P. and Energy Transfer Partners, L.P., and two pipeline laterals called the Fayetteville and Greenville Laterals, have already been constructed by Texas Gas Transmission, LLC, or Texas Gas, a subsidiary of Boardwalk Pipeline Partners, LP.  FEP was placed in-service in January 2011.  SES has a maximum aggregate commitment of 1,200,000 Dekatherms per day for an initial term of ten years from the in-service date.  SES has maximum aggregate commitments of 800,000 MMBtu per day on the Fayetteville Lateral and 640,000 MMBtu per day on the Greenville Lateral.

Prior to the commencement of service on the Fayetteville and Greenville Laterals and the Fayetteville Express Pipeline, the majority of our natural gas from the Arkoma Basin was moved to markets in the Midwest and was sold primarily based on two indices, “NGPL TexOk” and “Centerpoint East.”  The Fayetteville and Greenville Laterals and the

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Fayetteville Express Pipeline allow us to transport our natural gas to markets in the eastern United States and interconnect with Texas Gas Zone 1, Tennessee Gas Pipeline 100, Trunkline Zone 1A, ANR, Tennessee Gas Pipeline 800, Columbia Gulf Mainline, TETCO M1 30" and Sonat price indices.  We rely in part upon the Fayetteville and Greenville Laterals and the Fayetteville Express Pipeline to service our increased production from the Fayetteville Shale play.  

During 2011, SES entered into a number of short and long term firm transportation service and gathering agreements in support of our growing Marcellus Shale operations in Pennsylvania. In March 2011, SES entered into a precedent agreement with Millennium Pipeline Company, L.L.C. pursuant to which it will enter into short and long term firm natural gas transportation services on Millennium’s existing system and expansions of the system are expected to be in-service by late 2012 and late 2013.  In June 2011, SES entered into a long term agreement with Bluestone Gathering, a wholly owned subsidiary of DTE Energy Company, pursuant to which Bluestone Gathering will build and operate a natural gas gathering system in Susquehanna County, Pennsylvania and Broome County, New York, and provide gathering services to SES in support of a portion of our future Marcellus Shale natural gas production.  The projected in-service date for the gathering system is expected to be during the third quarter of 2012.  We have also entered into a 15-year agreement with a subsidiary of Boardwalk Pipeline Partners for the construction of a gathering system in Susquehanna and Lackawanna counties in Pennsylvania, which once constructed is expected to have a delivery capacity of 175,000 Dekatherm/day.  SES also executed firm transportation agreements with Tennessee Gas Pipeline Company (“TGP”) that increase our ability to move its Marcellus Shale natural gas production in the short term to market as well as a precedent agreement for an expansion project with a projected in-service date of November 2013 pursuant to which SES has subscribed for 100,000 Dekatherm/day of capacity.  TGP’s expansion project will expand its 300 Line in Pennsylvania to provide natural gas transportation from the Marcellus Shale supply area to existing delivery points on the TGP system.  TGP filed a certificate application for the project with the Federal Energy Regulatory Commission in late 2011. Pending regulatory approvals, construction would begin in 2013, with a projected November 1, 2013 in-service date.  We have provided certain guarantees of a portion of SES’s obligations under these agreements.  We refer you to the risk factor “If our Fayetteville Shale and Marcellus Shale drilling programs fail to produce our projected supply of natural gas, our investments in our gathering operations could be lost.  In addition, our commitments for transportation on third-party pipelines and gathering systems could make the sale of our natural gas uneconomic, which could have an adverse effect on our results of operations financial condition and cash flows.” 

As of December 31, 2011, SES’s obligations for demand and similar charges under the firm transportation agreements totaled approximately $2.1 billion and we have not recognized any guarantee obligations with respect to the firm transportation agreements and the gathering project and services.  

Competition

Our gas gathering and marketing activities compete with numerous other companies offering the same services, many of which possess larger financial and other resources than we have.  Some of these competitors are other producers and affiliates of companies with extensive pipeline systems that are used for transportation from producers to end-users. Other factors affecting competition are the cost and availability of alternative fuels, the level of consumer demand and the cost of and proximity to pipelines and other transportation facilities.  We believe that our ability to compete effectively within the marketing segment in the future depends upon establishing and maintaining strong relationships with producers and end-users.

Regulation

In March 2006, the United States Department of Transportation, or DOT, issued new rules pertaining to certain gathering lines. Compliance with the new rules has not had a material adverse impact on our operations. We refer you to “Other Items — Environmental Matters” and the risk factor “We incur substantial costs to comply with government regulations, especially regulations relating to environmental protection, and could incur even greater costs in the future” in Item 1A of Part I of this Form 10-K for a discussion of the impact of government regulation on our Midstream Services business.

In November 2008, the FERC issued a Final Rule in Order No. 720, which requires, in relevant part, major non-interstate natural gas pipelines to post, on a daily basis, specific scheduled flow information at each receipt or delivery point with a design capacity of 15,000 MMBtu per day or more. A “major non-interstate pipeline” is a pipeline that is not classified as a natural gas company under the Natural Gas Act (“NGA”) of 1938 and delivers on average more than 50 million MMBtu of natural gas annually over a three year period.  Our gathering system in Arkansas constitutes a “major non-interstate pipeline” under Order No. 720. In October 2011, the United States Court of Appeals for the Fifth Circuit issued a decision granting the Texas Pipeline Association and the Railroad Commission’s petition for review and vacating FERC’s Order Nos. 720 and 720-A.  In its order, the 5th Circuit held that Order Nos. 720 and 720-A exceeded the scope of

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FERC’s authority under the NGA and that the FERC cannot require a non-interstate pipeline to post capacity and scheduling information. Notwithstanding the ruling, Order 720 remains in effect.

Other

Our other operations have primarily consisted of real estate development activities concentrated on tracts of land located in Arkansas.  There were no sales of commercial real estate in 2011, 2010 or 2009. As of December 31, 2011, we owned our office complex in Fayetteville, Arkansas, an interest in approximately 15 acres of undeveloped real estate near the Fayetteville complex, our office complex in Conway, Arkansas and 1,761 acres in or near Conway, Arkansas, related to our operations in the Fayetteville Shale play.

Our sand mining operations, in support of our E&P business, are subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by 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 Form 10-K.

Other Items

Reconciliation of Non-GAAP Measures

EBITDA is defined as net income (loss) attributable to Southwestern Energy plus interest, income tax expense, depreciation, depletion and amortization.  We have included information concerning EBITDA in this Form 10-K 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 our industry.  EBITDA should not be considered in isolation or as a substitute for net income (loss) attributable to Southwestern Energy, net cash provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles in the United States, or GAAP, or as a measure of our profitability or liquidity.  EBITDA as defined above may not be comparable to similarly titled measures of other companies.

We believe that net income (loss) attributable to Southwestern Energy is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA as defined.  The following table reconciles EBITDA, as defined, with net income (loss) attributable to Southwestern Energy for the years-ended December 31, 2011, 2010 and 2009:

		Midstream
	E&P	Services	Other	Total
	(in thousands)
2011
Net income (loss) attributable to Southwestern Energy	$           493,726	$           142,591	$               1,452	$        637,769
Depreciation, depletion and amortization	666,125	37,261	1,125	704,511
Net interest expense	9,026	15,049	—	24,075
Provision for income taxes	322,714	90,221	286	413,221
EBITDA	$        1,491,591	$           285,122	$               2,863	$     1,779,576
2010
Net income attributable to Southwestern Energy	$           498,346	$           105,636	$                  136	$        604,118
Depreciation, depletion and amortization	561,018	28,765	549	590,332
Net interest expense	7,888	18,275	—	26,163
Provision for income taxes	323,748	67,834	77	391,659
EBITDA	$        1,391,000	$           220,510	$                  762	$     1,612,272
2009
Net income (loss) attributable to Southwestern Energy	$         (109,690)	$             73,950	$                    90	$         (35,650)
Depreciation, depletion and amortization	474,014	19,213	431	493,658
Impairment of natural gas and oil properties	907,812	—	—	907,812
Net interest expense	15,237	3,401	—	18,638
Provision (benefit) for income taxes	(61,725)	45,303	59	(16,363)
EBITDA	$        1,225,648	$           141,867	$                  580	$     1,368,095

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Environmental Regulation   

Our operations are subject to regulation in the jurisdictions in which we operate.  We have operations in the United States and, to a much lesser extent, in Canada.  In the United States, we are subject to numerous federal, state and local laws and regulations including the Comprehensive Environmental Response, Compensation and Liability Act, or the CERCLA, the Clean Water Act, the Clean Air Act and similar state statutes.  These laws and regulations require permits for drilling wells and the maintenance of bonding requirements in order to drill or operate wells and also regulate the spacing and location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, the plugging and abandoning of wells, the prevention and cleanup of pollutants and other matters.  We maintain insurance against costs of clean-up operations, but we are not fully insured against all such risks.  Although future environmental obligations are not expected to have a material impact on the results of our operations or financial condition, there can be no assurance that future developments, such as increasingly stringent environmental laws or enforcement thereof, will not cause us to incur material environmental liabilities or costs.

Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal fines and penalties and the imposition of injunctive relief.  Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent and costly waste handling, storage, transport, disposal or cleanup requirements could materially adversely affect our operations and financial position, as well as those in the natural gas and oil industry in general.  Although we believe that we are in substantial compliance with applicable environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on us, there can be no assurance that this will continue in the future.  

The Oil Pollution Act, as amended, or the OPA, and regulations thereunder impose a variety of requirements on “responsible parties” related to the prevention of oil spills and liability for damages resulting from such spills in United States’ waters.  A “responsible party” includes the owner or operator of an onshore facility, pipeline or vessel, or the lessee or permittee of the area in which an offshore facility is located.  OPA assigns liability to each responsible party for oil cleanup costs and a variety of public and private damages.  While liability limits apply in some circumstances, a party cannot take advantage of liability limits if the spill was caused by gross negligence or willful misconduct or resulted from violation of a federal safety, construction or operating regulation.  If the party fails to report a spill or to cooperate fully in the cleanup, liability limits likewise do not apply.  Few defenses exist to the liability imposed by OPA.  OPA imposes ongoing requirements on a responsible party, including the preparation of oil spill response plans and proof of financial responsibility to cover environmental cleanup and restoration costs that could be incurred in connection with an oil spill.  

CERCLA, also known as the “Superfund law,” imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons that are considered to be responsible for the release of a “hazardous substance” into the environment.  These persons include the owner or operator of the disposal site or sites where the release occurred and companies that transported or disposed or arranged for the transport or disposal of the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.  

The Resource Conservation and Recovery Act, as amended, or the RCRA, generally does not regulate wastes generated by the exploration and production of natural gas and oil.  The RCRA specifically excludes from the definition of hazardous waste “drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal energy.”  However, legislation has been proposed in Congress from time to time that would reclassify certain natural gas and oil exploration and production wastes as “hazardous wastes,” which would make the reclassified wastes subject to much more stringent handling, disposal and clean-up requirements. If such legislation were to be enacted, it could have a significant impact on our operating costs, as well as the natural gas and oil industry in general.  Moreover, ordinary industrial wastes, such as paint wastes, waste solvents, laboratory wastes and waste oils, may be regulated as hazardous waste.

Our activities in Canada have to date been limited to certain geological and geophysical activities that are not subject to extensive environmental regulation.  Once we begin exploration activities in New Brunswick, we will be subject to federal, provincial and local environmental regulations that we believe require compliance efforts comparable to those required in the United States.

We own or lease, and have in the past owned or leased, onshore properties that for many years have been used for or associated with the exploration and production of natural gas and oil.  Although we have utilized operating and disposal

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practices that were standard in the industry at the time, hydrocarbons or other wastes may have been disposed of or released on or under the properties owned or leased by us on or under other locations where such wastes have been taken for disposal. In addition, a portion of these properties have been operated by third parties whose treatment and disposal or release of wastes was not under our control.  These properties and the wastes disposed thereon may be subject to CERCLA, the Clean Water Act, the RCRA and analogous state laws.  Under such laws, we could be required to remove or remediate previously disposed wastes (including waste disposed of or released by prior owners or operators) or property contamination (including groundwater contamination by prior owners or operators), or to perform remedial plugging or closure operations to prevent future contamination.   

The Federal Water Pollution Control Act, as amended, or the FWPCA, imposes restrictions and strict controls regarding the discharge of produced waters and other natural gas and oil waste into navigable waters.  Permits must be obtained to discharge pollutants to waters and to conduct construction activities in waters and wetlands.  The FWPCA and similar state laws provide for civil, criminal and administrative penalties for any unauthorized discharges of pollutants and unauthorized discharges of reportable quantities of oil and other hazardous substances. Many state discharge regulations and the Federal National Pollutant Discharge Elimination System general permits issued by the EPA prohibit the discharge of produced water and sand, drilling fluids, drill cuttings and certain other substances related to the natural gas and oil industry into coastal waters.  Although the costs to comply with zero discharge mandates under federal or state law may be significant, the entire industry is expected to experience similar costs and we believe that these costs will not have a material adverse impact on our results of operations or financial position. The EPA has adopted regulations requiring certain natural gas and oil exploration and production facilities to obtain permits for storm water discharges. Costs may be associated with the treatment of wastewater or developing and implementing storm water pollution prevention plans.

In the past few years, there has been an increased focus on environmental aspects of hydraulic fracturing practices at the federal, state and local levels of government although hydraulic fracturing is typically regulated by state oil and natural gas commissions.  The EPA has asserted federal regulatory authority over certain hydraulic fracturing activities involving diesel under the Safe Drinking Water Act and has begun the process of drafting guidance documents related to this newly asserted regulatory authority.  In addition to the EPA’s efforts, legislation has been introduced before Congress, called the Fracturing Responsibility and Awareness of Chemicals Act, to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process. There are also certain governmental reviews either underway or being proposed that focus on environmental aspects of hydraulic fracturing practices. A number of federal agencies are analyzing, or have been requested to review, a variety of environmental issues associated with hydraulic fracturing. For a discussion of hydraulic fracturing related environmental legislation, we refer you to “Exploration and Production — Federal, State and Local Regulation of Hydraulic Fracturing” and the risk factor “Our financial condition and results of operation could be adversely affected by legislative and regulatory initiatives in the United States and Canada relating to hydraulic fracturing that could result in increased costs and additional operating restrictions or delays or prevent us realizing the value of undeveloped acreage” in Item 1A of Part I of this Form 10-K.

Employees

At December 31, 2011, we had 2,287 total employees.  None of our employees were covered by a collective bargaining agreement at year-end 2011.  We believe that our relationships with our employees are good.

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GLOSSARY OF CERTAIN INDUSTRY TERMS

The definitions set forth below shall apply to the indicated terms as used in this Form 10-K. All natural gas reserves and production reported in this Form 10-K are stated at the legal pressure base of the state or area where the reserves exist and at 60 degrees Fahrenheit.

“Acquisition of properties” Costs incurred to purchase, lease or otherwise acquire a property, including costs of lease bonuses and options to purchase or lease properties, the portion of costs applicable to minerals when land including mineral rights is purchased in fee, brokers’ fees, recording fees, legal costs, and other costs incurred in acquiring properties. For additional information, see the SEC’s definition in Rule 4-10(a) (1) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.    

“Analogous reservoir”  Analogous reservoirs, as used in resources assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, an “analogous reservoir” refers to a reservoir that shares the following characteristics with the reservoir of interest:

(i)

Same geological formation (but not necessarily in pressure communication with the reservoir of interest);

(ii)

Same environment of deposition;

(iii)

Similar geological structure; and

(iv)

Same drive mechanism.

For additional information, see the SEC’s definition in Rule 4-10(a) (2) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.   

“Available reserves”  Estimates of the amounts of oil and gas which the registrant can produce from current proved developed reserves using presently installed equipment under existing economic and operating conditions and an estimate of amounts that others can deliver to the registrant under long-term contracts or agreements on a per-day, per-month, or per-year basis.  For additional information, see the SEC’s definition in Item 1207(d) of Regulation S-K, a link for which is available at the SEC's website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Bbl”  One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons.

“Bcf”  One billion cubic feet of natural gas.

“Bcfe”  One billion cubic feet of natural gas equivalent.  Determined using the ratio of one barrel of crude oil to six Mcf of natural gas.

“Btu”  British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

“Dekatherm”  One million British thermal units (Btu).

“Deterministic estimate” The method of estimating reserves or resources is called deterministic when a single value for each parameter (from the geoscience, engineering, or economic data) in the reserves calculation is used in the reserves estimation procedure. For additional information, see the SEC’s definition in Rule 4-10(a) (5) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Developed oil and gas reserves” Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i)

Through existing wells with existing equipment and operating methods or in which the cost of the required    equipment is relatively minor compared to the cost of a new well; and

(ii)

Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

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For additional information, see the SEC’s definition in Rule 4-10(a) (6) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Development costs” Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas. More specifically, development costs, including depreciation and applicable operating costs of support equipment and facilities and other costs of development activities, are costs incurred to:

(i)

Gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, road building, and relocating public roads, gas lines, and power lines, to the extent necessary in developing the proved reserves.

(ii)

Drill and equip development wells, development-type stratigraphic test wells, and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment, and the wellhead assembly.

(iii)

Acquire, construct, and install production facilities such as lease flow lines, separators, treaters, heaters, manifolds, measuring devices, and production storage tanks, natural gas cycling and processing plants, and central utility and waste disposal systems.

(iv)

Provide improved recovery systems.

For additional information, see the SEC’s definition in Rule 4-10(a) (7) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Development project” A development project is the means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field, or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project. For additional information, see the SEC’s definition in Rule 4-10(a) (8) of Regulation S-X, a link for which is available at the SEC’s website,  http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml. 

“Development well”  A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. For additional information, see the SEC’s definition in Rule 4-10(a) (9) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Downspacing”   The process of drilling additional wells within a defined producing area to increase recovery of natural gas and oil from a known reservoir.

“EBITDA”  Represents net income (loss) attributable to Southwestern Energy common stock plus interest, income taxes, depreciation, depletion and amortization and the impairment of natural gas and oil properties.  We refer you to “Business — Other Items — Reconciliation of Non-GAAP Measures” in Item 1 of Part I of this Form 10-K for a table that reconciles EBITDA with our net income (loss) attributable to Southwestern Energy from our audited financial statements.

“Economically producible” The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. The value of the products that generate revenue shall be determined at the terminal point of oil and gas producing activities. For additional information, see the SEC’s definition in Rule 4-10(a) (10) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Estimated ultimate recovery (EUR)” Estimated ultimate recovery is the sum of reserves remaining as of a given date and cumulative production as of that date. For additional information, see the SEC’s definition in Rule 4-10(a) (11) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

 “Exploitation” The development of a reservoir to extract its gas and/or oil.

“Exploratory well” An exploratory well is a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, an extension well, a service well, or a stratigraphic test well as those items are defined in this section.  For additional information, see the SEC’s definition in Rule 4-10(a) (13) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Field” An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field that are

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separated vertically by intervening impervious, strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms structural feature and stratigraphic condition are intended to identify localized geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc. For additional information, see the SEC’s definition in Rule 4-10(a) (15) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Fracture stimulation” A process whereby fluids mixed with proppants are injected into a wellbore under pressure in order to fracture, or crack open, reservoir rock, thereby allowing oil and/or natural gas trapped in the reservoir rock to travel through the fractures and into the well for production.

“Gross well or acre”  A well or acre in which the registrant owns a working interest. The number of gross wells is the total number of wells in which the registrant owns a working interest. For additional information, see the SEC's definition in Item 1208(c)(1) of Regulation S-K, a link for which is available at the SEC's website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Gross working interest”  Gross working interest is the working interest in a given property plus the proportionate share of any royalty interest, including overriding royalty interest, associated with the working interest.

“Infill drilling”  Drilling wells in between established producing wells to increase recovery of natural gas and oil from a known reservoir.

“MBbls”  One thousand barrels of crude oil or other liquid hydrocarbons.

“Mcf”  One thousand cubic feet of natural gas.

“Mcfe”  One thousand cubic feet of natural gas equivalent.  Determined using the ratio of one barrel of crude oil to six Mcf of natural gas.

“MMBbls”  One million barrels of crude oil or other liquid hydrocarbons.

“MMBtu”  One million British thermal units (Btu).

“MMcf”  One million cubic feet of natural gas.

“MMcfe”  One million cubic feet of natural gas equivalent. Determined using the ratio of one barrel of crude oil to six Mcf of natural gas.

“Net revenue interest”  Economic interest remaining after deducting all royalty interests, overriding royalty interests and other burdens from the working interest ownership.

“Net well or acre”  Deemed to exist when the sum of fractional ownership working interests in gross wells or acres equals one. The number of net wells or acres is the sum of the fractional working interests owned in gross wells or acres expressed as whole numbers and fractions of whole numbers. For additional information, see the SEC's definition in Item 1208(c)(2) of Regulation S-K, a link for which is available at the SEC's website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“NYMEX”  The New York Mercantile Exchange.

“Operating interest”  An interest in natural gas and oil that is burdened with the cost of development and operation of the property.

“Overriding royalty interest”  A fractional, undivided interest or right to production or revenues, free of costs, of a lessee with respect to an oil or natural gas well, that overrides a working interest.

“Play”  A term applied to a portion of the exploration and production cycle following the identification by geologists and geophysicists of areas with potential oil and natural gas reserves.

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“Present Value Index” or “PVI”  A measure that is computed for projects by dividing the dollars invested into the PV-10 resulting from the investment.

“Probabilistic estimate” The method of estimation of reserves or resources is called probabilistic when the full range of values that could reasonably occur for each unknown parameter (from the geoscience and engineering data) is used to generate a full range of possible outcomes and their associated probabilities of occurrence. For additional information, see the SEC’s definition in Rule 4-10(a) (19) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Producing property”  A natural gas and oil property with existing production.

“Productive wells”  Producing wells and wells mechanically capable of production. For additional information, see the SEC's definition in Item 1208(c)(3) of Regulation S-K, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Proppant”  Sized particles mixed with fracturing fluid to hold fractures open after a hydraulic fracturing treatment.  In addition to naturally occurring sand grains, man-made or specially engineered proppants, such as resin-coated sand or high-strength ceramic materials like sintered bauxite, may also be used.  Proppant materials are carefully sorted for size and sphericity to provide an efficient conduit for production of fluid from the reservoir to the wellbore.

“Proved developed producing” Proved developed reserves that can be expected to be recovered from a reservoir that is currently producing through existing wells.

“Proved developed reserves”  Proved gas and oil that are also developed gas and oil reserves.

“Proved oil and gas reserves”   Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. Also referred to as “proved reserves.” For additional information, see the SEC’s definition in Rule 4-10(a) (22) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Proved reserves”  See “proved oil and gas reserves.”

“Proved undeveloped reserves”  Proved oil and gas reserves that are also undeveloped oil and gas reserves.

“PV-10”  When used with respect to natural gas and oil reserves, PV-10 means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices and costs in effect as of the date of the report or estimate, without giving effect to non-property related expenses such as general and administrative expenses, debt service and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount rate of 10%.  Also referred to as “present value.” After-tax PV-10 is also referred to as “standardized measure” and is net of future income tax expense.

“Reserve life index”  The quotient resulting from dividing total reserves by annual production and typically expressed in years.

“Reserve replacement ratio”  The sum of the estimated net proved reserves added through discoveries, extensions, infill drilling and acquisitions (which may include or exclude reserve revisions of previous estimates) for a specified period of time divided by production for that same period of time.

“Reservoir” A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. For additional information, see the SEC’s definition in Rule 4-10(a) (27) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

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“Royalty interest”  An interest in a natural gas and oil property entitling the owner to a share of oil or natural gas production free of production costs.

“Tcf”  One trillion cubic feet of natural gas.

“Tcfe”  One trillion cubic feet of natural gas equivalent. Determined using the ratio of one barrel of crude oil to six Mcf of natural gas.

“Unconventional play” A term used in the natural gas and oil industry to refer to a play in which the targeted reservoirs generally fall into one of three categories: (1) tight sands, (2) coal beds, or (3) natural gas shales. The reservoirs tend to cover large areas and lack the readily apparent traps, seals and discrete hydrocarbon-water boundaries that typically define conventional reservoirs. These reservoirs generally require fracture stimulation treatments or other special recovery processes in order to produce economic flow rates.

“Undeveloped acreage” Those leased acres on which wells have not been drilled or completed to a point that would permit the production of economic quantities of oil or gas regardless of whether such acreage contains proved reserves. For additional information, see the SEC's definition in Item 1208(c)(4) of Regulation S-K, a link for which is available at the SEC's website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Undeveloped oil and gas reserves” Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.  Also referred to as “undeveloped reserves.”  For additional information, see the SEC’s definition in Rule 4-10(a) (31) of Regulation S-X, a link for which is available at the SEC’s website, http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

“Undeveloped reserves” See “undeveloped oil and gas reserves.”

“USD” United States Dollar.

 “Well spacing” The regulation of the number and location of wells over an oil or natural gas reservoir, as a conservation measure.  Well spacing is normally accomplished by order of the regulatory conservation commission in the applicable jurisdiction.  The order may be statewide in its application (subject to change for local conditions) or it may be entered for each field after its discovery. In the operational context, “well spacing” refers to the area attributable between producing wells within the scope of what is permitted under a regulatory order.

“Working interest” An operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and to receive a share of production.

“Workovers” Operations on a producing well to restore or increase production.

“WTI” West Texas Intermediate, the benchmark crude oil in the United States.

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ITEM 1A.  RISK FACTORS

In addition to the other information included in this Form 10-K, the following risk factors should be considered in evaluating our business and future prospects.  The risk factors described below represent what we believe are the most significant risk factors with respect to us and our business.  In assessing the risks relating to our business, investors should also read the other information included in this Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Cautionary Statement about Forward-Looking Statements.”

A substantial or extended decline in natural gas and oil prices would have a material adverse affect on us.

In the first half of 2008, natural gas and oil prices were at or near their highest historical levels but subsequently natural gas and oil prices declined significantly.  Natural gas prices declined in 2011 as compared with 2010 and have continued to decline in the first two months of 2012, and are not expected to significantly increase in 2012.  The further significant decline in natural gas and oil prices would have a material adverse effect on our financial position, our results of operations, our access to capital and the quantities of natural gas and oil that may be economically produced by us.  A significant decrease in price levels for an extended period would negatively affect us in several ways including:

·

our cash flow would be reduced, decreasing funds available for capital investments employed to replace reserves or increase production;

·

certain reserves would no longer be economic to produce, leading to both lower proved reserves and cash flow; and

·

access to other sources of capital, such as equity or long-term debt markets, could be severely limited or unavailable.

Consequently, our revenues and profitability would suffer.

Lower natural gas and oil prices and/or increased development costs may cause us to record ceiling test write-downs.  

We use the full cost method of accounting for our natural gas and oil operations.  Accordingly, we capitalize the cost to acquire, explore for and develop natural gas and oil properties.  Under the full cost accounting rules of the SEC, the capitalized costs of natural gas and oil properties – net of accumulated depreciation, depletion and amortization, and deferred income taxes – may not exceed a “ceiling limit” on a country-by-country basis.  This is equal to the present value of estimated future net cash flows from proved natural gas and oil reserves, discounted at 10 percent, plus the lower of cost or fair value of unproved properties included in the costs being amortized, net of related tax effects.

These rules generally require pricing future natural gas and oil production at the unescalated natural gas and oil prices in effect at the end of each fiscal quarter, including the impact of derivatives qualifying as cash flow hedges, utilizing the average price in the 12-month period prior to the end of each fiscal quarter, defined as the unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices were defined by contractual arrangements, excluding escalations based upon future conditions. They also require a write-down if the ceiling limit is exceeded.  Once a write-down is taken, it cannot be reversed in future periods even if natural gas and oil prices increase.

In the period ended March 31, 2009, we incurred a ceiling test write-down of $907.8 million which resulted in an operating loss for our company for 2009. If natural gas and oil prices decline below levels utilized in our ceiling limit test at December 31, 2011 and/or operating costs, development costs, transportation costs or basis differentials increase, a write-down may occur, which would adversely impact our results of operation and financial condition.  Using the first-day-of-the-month prices of natural gas for the first two months of 2012 and NYMEX strip prices for the remainder of 2012, as applicable, the prices required to be used to determine the ceiling limit could result in a ceiling test write-down in the first quarter of 2012 and are likely to require ceiling test write-downs in each of the remaining quarters in 2012.

Our level of indebtedness and the terms of our financing arrangements may adversely affect operations and limit our growth.

At December 31, 2011, we had total indebtedness of $1,343.3 million, including borrowings of $671.5 million under our revolving credit facility.  At February 23, 2012, we had long-term indebtedness of $1,495.2 million, including borrowings of $823.4 million under our revolving credit facility.  We currently expect to utilize the borrowing availability

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under our revolving credit facility in order to fund a portion of our capital investments in 2012.  See also our risk factor headed “We may have difficulty financing our planned capital investments which could adversely affect our growth,” below.

The terms of our various financing agreements, including but not limited to the indentures relating to our outstanding senior notes, our revolving credit facility and the master lease agreement relating to our drilling rigs and our other equipment leases, which we collectively refer to as our “financing agreements,” impose restrictions on our ability and, in some cases, the ability of our subsidiaries to take a number of actions that we may otherwise desire to take, including one or more of the following:

·

incurring additional debt, including guarantees of indebtedness;

·

creating liens on our assets; and

·

selling all or substantially all of our assets.

Our level of indebtedness and off-balance sheet obligations, and the covenants contained in our financing agreements, could have important consequences for our operations, including:

·

requiring us to dedicate a substantial portion of our cash flow from operations to required payments, thereby reducing the availability of cash flow for working capital, capital investments and other general business activities;

·

limiting our ability to obtain additional financing in the future for working capital, capital investments, acquisitions and general corporate and other activities;

·

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

·

detracting from our ability to successfully withstand a downturn in our business or the economy generally.

Our ability to comply with the covenants and other restrictions in our financing agreements may be affected by events beyond our control, including prevailing economic and financial conditions.  If we fail to comply with the covenants and other restrictions, it could lead to an event of default and the acceleration of our obligations under those agreements.  We may not have sufficient funds to make such payments.  If we are unable to satisfy our obligations with cash on hand, we could attempt to refinance such debt, sell assets or repay such debt with the proceeds from a public offering of securities.  We cannot assure you that we will be able to generate sufficient cash flow to pay the interest on our debt, to meet our lease obligations, or that future borrowings, equity financings or proceeds from the sale of assets will be available to pay or refinance such debt or obligations.  The terms of our financing agreements may also prohibit us from taking such actions.  Factors that will affect our ability to raise cash through a public offering, a refinancing of our debt or a sale of assets include financial market conditions and our market value and operating performance at the time of such offering or other financing.  We cannot assure you that any such proposed offering, refinancing or sale of assets can be successfully completed or, if completed, that the terms will be favorable to us.

We may have difficulty financing our planned capital investments, which could adversely affect our growth.

We have experienced and expect to continue to experience substantial capital investment and working capital needs as a result of our drilling program. Our planned capital investments for 2012 are expected to exceed the net cash generated by our operations under current natural gas prices.  We expect to borrow under our credit facility to fund capital investments that are in excess of our net cash flow and cash on hand.  Our ability to borrow under our credit facility is subject to certain conditions.  At December 31, 2011, we were in compliance with the borrowing conditions of our credit facility.  If we are not in compliance with the terms of our credit facility in the future or if the lenders under our credit facility are unable to fulfill their commitments, we may not be able to borrow under the facility to fund our capital investments.  We also cannot be certain that other financing will be available to us on acceptable terms or at all.  In the event additional capital resources are unavailable, we may curtail our drilling, development and other activities or be forced to sell some of our assets on an untimely or unfavorable basis.  Any such curtailment or sale could have a material adverse effect on our results and future operations.

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Natural gas and oil prices are volatile.  Volatility in natural gas and oil prices can adversely affect our results and the price of our common stock.  This volatility also makes valuation of natural gas and oil producing properties difficult and can disrupt markets.

Natural gas and oil prices have historically been, and are likely to continue to be, volatile.  In recent years, there has been a significant decline in natural gas prices as evidenced by New York Mercantile Exchange (“NYMEX”) natural gas prices ranging from a high of $13.58 per MMBtu in 2008 to a recent low of $2.32 per MMBtu in January 2012.  The prices for natural gas and oil are subject to wide fluctuation in response to a number of factors, including:

·

relatively minor changes in the supply of and demand for natural gas and oil;

·

market uncertainty;

·

worldwide economic conditions;

·

weather conditions;

·

import prices;

·

political conditions in major oil producing regions, especially the Middle East;

·

actions taken by OPEC;  

·

competition from other sources of energy; and

·

economic, political and regulatory developments.

Historically we have also experienced price volatility as a result of locational differentials for our production from the Arkoma Basin and East Texas, which at any time may further widen due to pipeline or other constraints. Price volatility makes it difficult to project the return on exploration and development projects involving our natural gas and oil properties and to estimate with precision the value of producing properties that we may own or propose to acquire.  In addition, unusually volatile prices often disrupt the market for natural gas and oil properties, as buyers and sellers have more difficulty agreeing on the purchase price of properties.  Our results of operations may fluctuate significantly as a result of, among other things, variations in natural gas and oil prices and production performance.  In recent years, natural gas and oil price volatility has become increasingly severe.  

The recent adoption of financial reform legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business which could have a material adverse effect on our financial position, results of operations and cash flows.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed by Congress and subsequently signed into law.  The new legislation required the Commodities Futures Trading Commission (the “CFTC”) and the SEC to promulgate rules and regulations implementing the new legislation within 360 days from the date of enactment. The CFTC has proposed regulations to set position limits for certain futures and option contracts in the major energy markets.  The financial reform legislation may also require us to comply with margin requirements and with certain clearing and trade execution requirements in connection with our derivative activities.  At this time it is not possible to predict whether or when the CFTC will adopt those rules or include comparable provisions in its rulemaking under the new legislation or how those rules will apply to us. The financial reform legislation may also require the counterparties to our derivative instruments to spin off some of their derivatives activities to separate entities, which may not be as creditworthy as the current counterparties, and such developments may affect the business relationships we have with those counterparties. The new legislation and any new regulations could significantly increase the cost of derivative contracts (including through requirements to post collateral which could adversely affect our available liquidity), materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks, reduce our ability to monetize or restructure our existing derivative contracts, increase our exposure to less creditworthy counterparties and limit our access to the capital necessary to grow our business. If, as a result of the legislation and regulations, we are no longer able to use derivatives as we have in the past, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital investments. Our revenues could also be adversely affected if a consequence of the legislation and regulations is lower commodity prices. Any of these consequences could have a material adverse effect on our financial position, results of operations and cash flows.

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Working interest owners of some of our properties may be unwilling or unable to cover their portion of development costs, which could change our exploration and development plans.  

Some of our working interest owners may have difficulties obtaining the capital needed to finance their activities, or may believe that estimated drilling and completion costs are excessive. As a result, these working interest owners may choose not to participate in certain wells or be unable or unwilling to pay their share of well costs as they become due. These actions could cause us to change our development plans for the affected properties.

Although our estimated natural gas and oil reserve data is independently audited, our estimates may still prove to be inaccurate.

Our reserve data represents the estimates of our reservoir engineers made under the supervision of our management.  Our reserve estimates are audited each year by Netherland, Sewell & Associates, Inc., or NSAI, an independent petroleum engineering firm.  In conducting its audit, the engineers and geologists of NSAI study our major properties in detail and independently develop reserve estimates.  NSAI’s audit consists primarily of substantive testing, which includes a detailed review of major properties that account for approximately 90% of present worth of the company’s total proved reserves.  NSAI’s audit process consists of sorting all fields by descending present value order and selecting the fields from highest value to descending value until the selected fields account for more than 80% of the present worth of our reserves.  The properties in the bottom 20% of the total present worth are not reviewed in the audit.  The fields included in approximately the top 90% present value as of December 31, 2011 accounted for approximately 92% of our total proved reserves and approximately 98% of our proved undeveloped reserves.  In the conduct of its audit, NSAI did not independently verify the data we provided to them with respect to ownership interests, oil and natural gas production, well test data, historical costs of operation and development, product prices, or any agreements relating to current and future operations of the properties and sales of production.  NSAI has advised us that if, in the course of its audit, something came to its attention that brought into question the validity or sufficiency of any such information or data, NSAI did not rely on such information or data until it had satisfactorily resolved any questions relating thereto or had independently verified such information or data. For the year-ended December 31, 2011, on January 30, 2012, NSAI issued its audit opinion as to the reasonableness of our reserve estimates, stating that our estimated proved oil and gas reserves are, in the aggregate, reasonable and have been prepared in accordance with Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers.

Natural gas and oil reserves cannot be measured exactly.  Our estimate of natural gas and oil reserves requires extensive judgments of reservoir engineering data and projections of cost that will be incurred in developing and producing reserves and is generally less precise than other estimates made in connection with financial disclosures. Our reservoir engineers prepare our reserve estimates under the supervision of our management.  Reserve estimates are prepared for each of our properties annually by the reservoir engineers assigned to the asset management team to which the property is assigned.  The reservoir engineering and financial data included in these estimates are reviewed by senior engineers who are not part of the asset management teams and our Manager – Capital Budgeting & Reserves, who was the technical person primarily responsible for the preparation of our reserve estimates, and has over eight years of experience in petroleum engineering, including the estimation of oil and natural gas reserves. He reports to our Senior Vice President – Corporate Development, who has more than 30 years of experience in reservoir engineering, including the estimation of oil and gas reserves in multiple basins both in the United States and internationally.  On our behalf, the Senior Vice President – Corporate Development engages NSAI, a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies, to independently audit our proved reserves estimates as discussed in more detail below. The financial data included in the reserve estimates are also separately reviewed by our accounting staff. Following these reviews and the audit, the reserve estimates are submitted by our Senior Vice President – Corporate Development, to our Chief Executive Officer for his review and approval prior to the presentation to our Board of Directors.  NSAI reports the results of its reserve audit to the Board of Directors and final authority over the estimates of our proved reserves rests with our Board of Directors.  We incorporate many factors and assumptions into our estimates including:

·

expected reservoir characteristics based on geological, geophysical and engineering assessments;

·

future production rates based on historical performance and expected future operating and investment activities;

·

future oil and natural gas prices and quality and locational differentials; and

·

future development and operating costs.

Although we believe our assumptions are reasonable based on the information available to us at the time we prepare our estimates, our actual reserves could vary considerably from estimated quantities of proved natural gas and oil reserves (in the aggregate and for a particular geographic location), production, revenues, taxes and development and operating

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expenditures.  In addition, our estimates of reserves may be subject to downward or upward revision based upon production history, results of future exploration and development, prevailing natural gas and oil prices, severance taxes, operating and development costs and other factors.  In 2011, our reserves were revised upward by 33.7 Bcfe, primarily due to improved performance in our Marcellus Shale properties, partially offset by downward performance revisions in our East Texas, Arkoma and Fayetteville properties and downward price revisions due to a comparative price decrease in the average 2011 price from the average 2010 price.  In 2010, our reserves were revised upward by 309.6 Bcfe, primarily due to improved performance in our Fayetteville Shale properties and upward price revisions due to a comparative price increase in the average 2010 price from the average 2009 price, partially offset by downward performance revisions in our East Texas properties. In 2009, our reserves were revised upward by 92.9 Bcfe, primarily due to improved performance in our Fayetteville Shale properties, partially offset by downward revisions due to a comparative decrease in the average 2009 price from the year-end 2008 gas price.  These revisions represented no greater than 7% of our total reserve estimates in each of these years, which we believe is indicative of the effectiveness of our internal controls.  Because we review our reserve projections for every property at the end of every year, any material change in a reserve estimate is included in subsequent reserve reports.

Finally, recovery of undeveloped reserves generally requires significant capital investments and successful drilling operations.  At December 31, 2011, approximately 2,633 Bcfe of our estimated proved reserves were undeveloped.  Our reserve data assume that we can and will make these expenditures and conduct these operations successfully, which may not occur.  Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Statement about Forward-Looking Statements” in Item 7 of Part II of this Form 10-K for additional information regarding the uncertainty of reserve estimates.

If we fail to find or acquire additional reserves, our reserves and production will decline materially from their current levels.

The rate of production from natural gas and oil properties generally declines as reserves are depleted.  Unless we acquire additional properties containing proved reserves, conduct successful exploration and development activities, successfully apply new technologies or identify additional behind-pipe zones or secondary recovery reserves, our proved reserves will decline materially as reserves are produced.  Future natural gas and oil production is, therefore, highly dependent upon our level of success in acquiring or finding additional reserves.

Our drilling plans for the Fayetteville Shale play and Marcellus Shale play are subject to change.

As of December 31, 2011, we had drilled and completed 2,380 operated wells relating to our Fayetteville Shale play and 23 operated wells relating to our Marcellus Shale play.  At year-end 2011, approximately 74% of our leasehold acreage in the Fayetteville Shale was held by production, excluding our acreage in the traditional Fairway and the approximately 163,000 net federal acres we hold in the Ozark Highlands Unit.  Approximately 3% of our leasehold acreage in the Marcellus Shale was held by production at year-end 2011. Our drilling plans are flexible and are dependent upon a number of factors, including the extent to which we can replicate the results of our most successful wells in addition to the natural gas and oil commodity price environment.  The determination as to whether we continue to drill wells in our operating areas may depend on any one or more of the following factors:

·

our ability to determine the most effective and economic fracture stimulation;

·

our ability to transport our production to the most favorable markets;

·

material changes in natural gas prices (including regional basis differentials);

·

changes in the costs to drill, complete or operate wells and our ability to reduce drilling risks;

·

the extent of our success in drilling and completing horizontal wells;

·

the costs and availability of oil field personnel services and drilling supplies, raw materials, and equipment and services;

·

success or failure of wells drilled in similar formations or which would use the same production facilities;

·

receipt of additional seismic or other geologic data or reprocessing of existing data;

·

the extent to which we are able to effectively operate our own drillings rigs;

·

availability and cost of capital; or

·

the impact of federal, state and local government regulation, including any increase in severance taxes.

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We continue to gather data about our prospects in our operating areas, and it is possible that additional information may cause us to alter our drilling schedule or determine that prospects in some portion of our acreage position should not be pursued at all.

If we fail to drill all of the wells that are necessary to hold our acreage, the initial lease terms could expire, which would result in the loss of certain leasehold rights.

Leases on approximately 235,167 net acres of our Fayetteville Shale acreage will expire in the next three years if we do not drill successful wells to develop the acreage or otherwise take action to extend the leases, of which 184,696 net acres are held on federal lands.  Approximately 112,832 net acres of our Marcellus Shale acreage will expire in the next three years if we do not drill successful wells to develop the acreage or otherwise take action to extend the leases.  As discussed above under “Our drilling plans for the Fayetteville Shale play and Marcellus Shale play are subject to change,” our ability to drill wells depends on a number of factors, including certain factors that are beyond our control.  With the exception of the Ozark Highlands Unit, which is federally leased, the current rules in Arkansas relating to the Fayetteville Shale provide that each drilling unit would consist of a governmental section of approximately 640 acres and operators are permitted to drill up to 16 wells per drilling unit for each unconventional source of supply.  In Pennsylvania, the location of our Marcellus Shale acreage, there are currently no rules establishing requirements for drilling units.  However, current rules in Arkansas may change and rules may be implemented in Pennsylvania that could impair our ability to drill or maintain our acreage position.  In addition, other E&P operator drilling activity could impair our ability to drill and maintain acreage positions.  To the extent that any field rules prevent us from successfully drilling wells in certain areas, we may not be able to drill the wells required to maintain our leasehold rights and our leasehold investments could be lost.

If our Fayetteville Shale and Marcellus Shale drilling programs fail to produce our projected supply of natural gas, our investments in our gas gathering operations could be lost.  In addition, our commitments for transportation on third-party pipelines and gathering systems could make the sale of our natural gas uneconomic, which could have an adverse effect on our results of operations, financial condition and cash flows.

Through December 31, 2011, we had invested approximately $933.0 million in our gas gathering system built for the Fayetteville Shale play and approximately $30.7 million in our gas gathering system built for the Marcellus Shale play.  To the extent necessary to gather our production, we may make further substantial investments in the expansion of our gas gathering systems.  Our gas gathering business will largely rely on natural gas sourced from our operations.  Our marketing subsidiary has also entered into multiple firm transportation agreements relating to natural gas volumes produced from our Fayetteville Shale play as well as a number of firm transportation and gathering agreements relating to the Marcellus Shale play. As of December 31, 2011, our aggregate demand charge commitments under these firm transportation agreements and gathering agreements were approximately $2.1 billion. If our Fayetteville Shale and Marcellus Shale drilling programs fail to produce significant supplies of natural gas, our investments in our gas gathering operations could be lost, and we could be forced to pay demand or other charges for transportation on pipelines and gathering systems that we would not be using.  These events could have an adverse effect on our results of operations, financial condition and cash flows.

Our exploration, development and drilling efforts and our operation of our wells may not be profitable or achieve our targeted returns.

Exploration, development, drilling and production activities are subject to many risks, including the risk that no commercially productive reservoirs will be discovered.  We invest in property, including undeveloped leasehold acreage that we believe will result in projects that will add value over time. However, we cannot assure you that all prospects will result in viable projects or that we will not abandon our initial investments. Additionally, there can be no assurance that leasehold acreage acquired by us will be profitably developed, that new wells drilled by us in prospects that we pursue will be productive or that we will recover all or any portion of our investment in such leasehold acreage or wells.  Drilling for natural gas and oil may involve unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient net reserves to return a profit after deducting drilling, operating and other costs.  In addition, wells that are profitable may not achieve our targeted rate of return.  Our ability to achieve our target PVI results is dependent upon the current and future market prices for natural gas and crude oil, costs associated with producing natural gas and crude oil and our ability to add reserves at an acceptable cost.  We rely to a significant extent on seismic data and other advanced technologies in identifying leasehold acreage prospects and in conducting our exploration activities.  The seismic data and other technologies we use do not allow us to know conclusively prior to acquisition of leasehold acreage or drilling a well whether natural gas or oil is present or may be produced economically.  The use of seismic data and other technologies also requires greater pre-drilling expenditures than traditional drilling strategies.

In addition, we may not be successful in implementing our business strategy of controlling and reducing our drilling and production costs in order to improve our overall return.  The cost of drilling, completing and operating a well is often

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uncertain, and cost factors can adversely affect the economics of a project.  Further, our drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including unexpected drilling conditions, title problems, pressure or irregularities in formations, equipment failures or accidents, adverse weather conditions, environmental and other governmental requirements and the cost of, or shortages or delays in the availability of, drilling rigs, equipment and services.

The success of our New Venture projects is subject to drilling and completion technique risks and enhanced recovery methods.  Our drilling results may not meet our expectations for reserves or production and the value of our undeveloped New Venture acreage could decline.

Many of our operations involve utilizing the latest drilling and completion techniques as developed by ourselves and our service providers in order to maximize cumulative recoveries and therefore generate the highest possible returns. Risks that we face while drilling include, but are not limited to, landing our well bore in the desired drilling zone, staying in the desired drilling zone while drilling horizontally through the formation, running our casing the entire length of the well bore, and being able to run tools and other equipment consistently through the horizontal well bore. Risks that we face while completing our wells include, but are not limited to, being able to fracture stimulate the planned number of stages, being able to run tools the entire length of the well bore during completion operations, and successfully cleaning out the well bore after completion of the final fracture stimulation stage.

We may inject water into formations on some of our properties to increase the production of crude oil, natural gas and associated liquids or employ other enhanced recovery methods in our operations. The additional production and reserves, if any, attributable to the use of enhanced recovery methods are inherently difficult to predict. If our enhanced recovery methods do not allow for the extraction of crude oil, natural gas and associated liquids in a manner or to the extent that we anticipate, we may not realize an acceptable return on our investments in such projects. In addition, if proposed legislation and regulatory initiatives relating to hydraulic fracturing become law, the cost of some of these enhanced recovery methods could increase substantially.

Ultimately, the success of drilling and completion techniques and enhanced recovery methods can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period. If our drilling results are less than anticipated or we are unable to execute our drilling program because of capital constraints, lease expirations, limited access to gathering systems and takeaway capacity, and/or crude oil, natural gas and natural gas liquids prices decline, the return on our investment for a particular project may not be as attractive as we anticipated and the value of our undeveloped acreage could decline in the future.

Our financial condition and results of operation could be adversely affected by legislative and regulatory initiatives in the United States and Canada relating to hydraulic fracturing that could result in increased costs and additional operating restrictions or delays or prevent us realizing the value of undeveloped acreage.

We utilize hydraulic fracturing in our E&P operations as a means of maximizing the productivity of our wells.  It is an essential and common practice in the oil and gas industry used to stimulate production of oil, natural gas, and associated liquids from dense subsurface rock formations. The knowledge and expertise in fracturing techniques we have developed through our operations in the Fayetteville Shale play are being utilized in our other operating areas, currently including our Marcellus Shale acreage and in the future expected to also include our exploration program in New Brunswick, Canada. Successful hydraulic fracturing techniques are also expected to be critical to the development of our recently announced unconventional horizontal oil play targeting the LSBD formation in Arkansas and Louisiana.  Hydraulic fracturing involves using water, sand, and certain chemicals to fracture the hydrocarbon-bearing rock formation to allow the flow of hydrocarbons into the wellbore. In our Fayetteville Shale play, the fracturing fluids we use are comprised of over 99.9% water and sand. The remaining 0.1% is comprised of small quantities of additives that contain chemical compounds such as hydrochloric acid, citric acid, glutaraldehyde and sodium chloride which is used in common household products.

In the past few years, there has been an increased focus on environmental aspects of hydraulic fracturing practices in the United States and Canada.  In the United States, hydraulic fracturing is typically regulated by state oil and natural gas commissions but there has recently been a number of regulatory initiatives at the federal and local levels as well as by other state agencies.  The Environmental Protection Agency (the “EPA”) has asserted federal regulatory authority over certain hydraulic fracturing activities involving diesel under the Safe Drinking Water Act and has begun the process of drafting guidance documents related to this newly asserted regulatory authority.

In July 2011, the EPA issued proposed rules that would subject all oil and gas operations (production, processing, transmission, storage and distribution) to regulation under the New Source Performance Standards (NSPS) and National

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Emission Standards for Hazardous Air Pollutants (NESHAPS) programs. The EPA proposed rules also include NSPS standards for completions of hydraulically fractured gas wells. These standards include the reduced emission completion (REC) techniques developed in the EPA's Natural Gas STAR program along with the pit flaring of gas not sent to the gathering line. The standards would be applicable to newly drilled and fractured wells as well as existing wells that are refractured. Further, the proposed regulations under NESHAPS include maximum achievable control technology (MACT) standards for those glycol dehydrators and storage vessels at major sources of hazardous air pollutants not currently subject to MACT standards. Final action on the proposed rules is expected no later than February 28, 2012. We are currently evaluating the effect these proposed rules could have on our business.

In October 2011, the EPA also announced a schedule for development of standards for disposal of wastewater produced from shale gas operations to publicly owned treatment works (POTWs). The regulations will be developed under the EPA's Effluent Guidelines Program under the authority of the Clean Water Act. The EPA anticipates issuing the proposed rules in 2014.

In addition to the EPA’s efforts, legislation has been introduced before Congress, called the Fracturing Responsibility and Awareness of Chemicals Act, to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process. There are also certain governmental reviews either underway or being proposed that focus on environmental aspects of hydraulic fracturing practices. A number of federal agencies are analyzing, or have been requested to review, a variety of environmental issues associated with hydraulic fracturing. The EPA has commenced a study of the potential environmental effects of hydraulic fracturing on drinking water and groundwater, with initial results expected to be available by late 2012 and final results by 2014. In addition, the U.S. Department of Energy is conducting an investigation into practices the agency could recommend to better protect the environment from drilling using hydraulic fracturing completion methods. Also, the U.S. Department of the Interior is considering disclosure requirements or other mandates for hydraulic fracturing on federal lands.

Certain states in which we operate, including Arkansas, Pennsylvania and Texas, have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, public disclosure, waste disposal and well construction requirements on hydraulic fracturing operations or otherwise seek to ban fracturing activities altogether.  In addition to state laws, local land use restrictions, such as city ordinances, may restrict or prohibit the performance of well drilling in general and/or hydraulic fracturing in particular. In the event state, local, or municipal legal restrictions are adopted in areas where we are currently conducting, or in the future plan to conduct operations, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and perhaps even be precluded from the drilling and/or completion of wells.

In the Province of New Brunswick in Canada, there are presently no hydraulic fracturing regulations but there has been increased attention on developing a regulatory framework.

Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition, including litigation, to oil and gas production activities using hydraulic fracturing techniques. Additional legislation or regulation could also lead to operational delays or increased operating costs in the production of oil, natural gas, and associated liquids including from the development of shale plays, or could make it more difficult to perform hydraulic fracturing. The adoption of additional federal, state or local laws or the implementation of regulations regarding hydraulic fracturing could potentially cause a decrease in the completion of new oil and gas wells, increased compliance costs and time, which could adversely affect our financial position, results of operations and cash flows.

We incur substantial costs to comply with government regulations, especially regulations relating to environmental protection, and could incur even greater costs in the future.

Our exploration, production, development and gas gathering and marketing operations are regulated extensively at the federal, state and local levels.  We have made and will continue to make large expenditures in our efforts to comply with these regulations, including environmental regulation. The natural gas and oil regulatory environment could change in ways that might substantially increase these costs.  Hydrocarbon-producing states regulate conservation practices and the protection of correlative rights.  These regulations affect our operations and limit the quantity of hydrocarbons we may produce and sell.  In addition, at the U.S. federal level, the FERC regulates interstate transportation of natural gas under the NGA.  Other regulated matters include marketing, pricing, transportation and valuation of royalty payments.

As an owner or lessee and operator of natural gas and oil properties, and an owner of gas gathering systems and sand mine, we are subject to various federal, state and local regulations relating to discharge of materials into, and protection of,

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the environment.  These regulations may, among other things, impose liability on us for the cost of pollution clean-up resulting from operations, subject us to liability for pollution damages, and require suspension or cessation of operations in affected areas.  Changes in or additions to regulations regarding the protection of the environment could significantly increase our costs of compliance, or otherwise adversely affect our business.

One of the responsibilities of owning and operating natural gas and oil properties is paying for the cost of abandonment. We may incur significant abandonment costs in the future which could adversely affect our financial results.

Natural gas and oil drilling and producing operations involve various operating and environmental risks that could result in substantial losses.

Our operations are subject to all the risks normally incident to the operation and development of natural gas and oil properties, the drilling of natural gas and oil wells and the sale of natural gas and oil, including but not limited to encountering well blowouts, cratering and explosions, pipe failure, fires, formations with abnormal pressures, uncontrollable flows of oil, natural gas, brine or well fluids, hydrocarbon drainage from adjacent third-party production, release of contaminants into the environment and other environmental hazards and risks and failure of counterparties to perform as agreed.

We maintain insurance against many potential losses or liabilities arising from our operations in accordance with customary industry practices and in amounts that we believe to be prudent.  However, our insurance does not protect us against all operational risks.  For example, we generally do not maintain business interruption insurance.  Additionally, pollution and environmental risks generally are not fully insurable.  These risks could give rise to significant costs not covered by insurance that could have a material adverse effect upon our financial results.  

Our ability to sell our natural gas and oil and/or to receive market prices for our production may be adversely affected by constraints or interruptions on gathering systems, pipelines, processing and transportation systems owned or operated by us or others.

The marketability of our natural gas and oil production depends in part on the availability, proximity, and capacity of gathering systems, processing and pipeline and other transportation systems owned or operated by third parties. The lack of available capacity in these systems and facilities can result in the shutting-in of producing wells, the delay or discontinuance of development plans for our properties, or lower price realizations. Although we have some contractual control over the transportation and gathering of our production, material changes in these business relationships could materially affect our operations. Federal and state regulation of natural gas and oil production, processing and transportation, tax and energy policies, changes in supply and demand, pipeline pressures, damage to or destruction of pipelines, infrastructure or capacity constraints, and general economic conditions could adversely affect our ability to produce, gather, and transport natural gas.

 In particular, if drilling in the Marcellus Shale continues to be successful, the amount of natural gas being produced by us and others could exceed the capacity of, and result in strains on, the various gathering, and transportation systems, pipelines, and other infrastructure available in these areas. It will be necessary for additional infrastructure, pipelines, gathering, and transportation systems and processing facilities to be expanded, built or developed to accommodate anticipated production from these areas. Because of the current economic climate, certain processing or pipeline and other gathering or transportation projects that might be, or are being, considered for these areas may not be developed timely or at all due to lack of financing, construction and permitting delays, permitting costs, well fees proposed in Pennsylvania, or other constraints. In addition, capital and other constraints could limit our ability to build or access intrastate gathering and transportation systems necessary to transport our production to interstate pipelines or other points of sale or delivery. In such event, we might have to delay or discontinue development activities or shut in our wells to wait for sufficient infrastructure development or capacity expansion and/or sell production at significantly lower prices than those quoted on NYMEX, which would adversely affect our results of operations and cash flows.

A portion of our production in any region may be interrupted, or shut in, from time to time for numerous reasons, including as a result of weather conditions, accidents, loss of pipeline, gathering, processing or transportation system access or capacity, field labor issues or strikes, or we might voluntarily curtail production in response to market conditions. If a substantial amount of our production is interrupted at the same time, it could temporarily adversely affect our cash flows and results of operations. 

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Shortages of oilfield equipment, services, supplies, raw materials and qualified personnel could adversely affect our results of operations.  

The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the natural gas and oil industry can fluctuate significantly, often in correlation with natural gas and oil prices, causing periodic shortages. These factors also cause significant increases in costs for equipment, services, personnel and raw materials (such as sand, cement, manufactured proppants and other materials utilized in the provision of the oilfield services).  Higher natural gas and oil prices generally stimulate increased demand and result in increased prices for drilling rigs, crews and associated supplies, equipment, services and raw materials.  In addition, our E&P operations also require local access to large quantities of water supplies and disposal services for produced water in connection with our hydraulic fracture stimulations due to prohibitive transportation costs. We cannot be certain when we will experience shortages or price increases, which could adversely affect our profit margin, cash flow and operating results or restrict our ability to drill wells and conduct ordinary operations.

Our business could be adversely affected by competition with other companies.  

The natural gas and oil industry is highly competitive, and our business could be adversely affected by companies that are in a better competitive position.  As an independent natural gas and oil company, we frequently compete for reserve acquisitions, exploration leases, licenses, concessions, marketing agreements, equipment and labor against companies with financial and other resources substantially larger than we possess.  Many of our competitors may be able to pay more for exploratory prospects and productive natural gas and oil properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than we can.  Our ability to explore for natural gas and oil prospects and to acquire additional properties in the future will depend on our ability to conduct operations, to evaluate and select suitable properties and to consummate transactions in this highly competitive environment.  In addition, many of our competitors have been operating in some of our core areas for a much longer time than we have or have established strategic long-term positions in geographic regions in which we may seek new entry.

We have made significant investments in our oilfield service operations, including our drilling rig and sand mine operations in order to meet certain of our oilfield service and resource needs, lower our costs and increase of the efficiency of our operations.  If our exploration and production activities are curtailed or disrupted, these operations may adversely impact our results of operations.  In addition, our continued expansion of these operations may adversely impact our relationships with third-party providers.  

We have made significant investments in order to meet certain of our oilfield services needs, including establishing our own drilling rig operations and sand mine.  In 2012, we plan to invest in and commence providing pressure pumping services for a portion of our operated wells.  We may make additional investments to expand these operations in the future.  Our drilling operations are conducted through our subsidiary, DDI, which had 404 employees as of December 31, 2011.  We have lease commitments for 14 drilling rigs and related equipment with respect to DDI's operations and we also own one drilling rig.  In addition to these rigs, we have contracts with third-party drilling companies for use of their rigs which may not be terminable without penalty.  In 2010, another of our subsidiaries, DeSoto Sand, LLC, began operating our first sand mine in Arkansas in order to meet a portion of our sand needs for the Fayetteville Shale play. We also purchase sand for use in our operations from various third parties, including certain of our oilfield service providers.  Our drilling rig and sand mine operations may have an adverse effect on our relationships with our existing third-party service and resource providers or our ability to secure these services and resources from other providers.  We may also compete with third-party providers for qualified personnel, which could adversely affect our relationships with such providers. If the operations of our drilling rigs and/or sand mine are disrupted or our existing third-party providers discontinue their relationships with us, we may not be able to secure alternative services or resources on a timely basis, or at all.  Even if we are able to secure alternative services or resources, there can be no assurance that such services or resources will be of equivalent quality or that pricing and other terms will be favorable to us.  If we are unable to secure third-party services or resources or if the terms are not favorable to us, our financial condition and results of operations could be adversely affected.

We depend upon our management team and our operations require us to attract and retain experienced technical personnel.  

The successful implementation of our business strategy and handling of other issues integral to the fulfillment of our business strategy depends, in part, on our experienced management team, as well as certain key geoscientists, geologists, engineers and other professionals employed by us.  The success of our technological initiatives that support our business enterprise is also dependent upon attracting and retaining experienced technical professionals.  The loss of key members of

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our management team or other highly qualified technical professionals could have a material adverse effect on our business, financial condition and operating results.

If natural gas prices decline further, our failure to hedge the remaining portion of our expected 2012 production could adversely affect our results of operations and financial condition.

To reduce our exposure to fluctuations in the prices of natural gas and oil, historically, we have entered into hedging arrangements with respect to a significant portion of our expected production.  As of February 23, 2012, we had NYMEX commodity price hedges on approximately 47% of our targeted 2012 natural gas production as compared to approximately 45% for 2009, 30% for 2010 and 52% for 2011.  Our price risk management activities increased natural gas sales by $315.6 million in 2011, increased natural gas sales by $290.3 million in 2010 and increased natural gas sales by $587.8 million in 2009. If natural gas prices decline in 2012, unless we enter into additional hedging arrangements, our revenues would be adversely affected.   To the extent that we engage in additional hedging activities in the current price environment, we would not realize the benefit of price increases above the levels of the hedges.  

In addition, such transactions may expose us to the risk of financial loss in certain circumstances, including instances in which:

·

our production is less than expected;

·

there is a widening of price differentials between delivery points for our production and the delivery point assumed in the hedge arrangement;

·

the counterparties to our futures contracts fail to perform the contracts; or

·

a sudden, unexpected event materially impacts natural gas or oil prices.

Finally, future market price volatility could create significant changes to the hedge positions recorded on our financial statements.  We refer you to “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II of this Form 10-K.

Certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and production may be eliminated as a result of future legislation.

The elimination of certain key U.S. federal income tax deductions currently available to oil and natural gas exploration and production companies has been proposed in recent years. These changes have included, among other proposals:

·

the repeal of the percentage depletion allowance for oil and natural gas properties;

·

the elimination of current deductions for intangible drilling and development costs;

·

the elimination of the deduction for certain domestic production activities; and

·

an extension of the amortization period for certain geological and geophysical expenditures.

It is unclear whether these or similar changes will be enacted. The passage of these or any similar changes in federal income tax laws to eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development could have an adverse effect on our financial position, results of operations and cash flows.

Our ability to produce natural gas could be impaired if we are unable to acquire adequate supplies of water for our drilling operations or are unable to dispose of the water we use at a reasonable cost and within applicable environmental rules.

Our inability to locate sufficient amounts of water, or dispose of or recycle water used in our E&P operations, could adversely impact our operations, particularly with respect to our Fayetteville Shale and Marcellus Shale operations, and also possibly our recently announced unconventional oil play targeting the LSBD formation in Arkansas and Louisiana. Moreover, the imposition of new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as hydraulic fracturing or disposal of waste, including, but not limited to, produced water, drilling fluids and other wastes associated with the exploration, development or production of natural gas.  The Federal Water Pollution Control Act, as amended, or the FWPCA, imposes restrictions and strict controls regarding the discharge of produced waters and other natural gas and oil waste into navigable waters.  Permits must be obtained to discharge 

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pollutants to waters and to conduct construction activities in waters and wetlands.  The FWPCA and similar state laws provide for civil, criminal and administrative penalties for any unauthorized discharges of pollutants and unauthorized discharges of reportable quantities of oil and other hazardous substances. Many state discharge regulations and the Federal National Pollutant Discharge Elimination System general permits issued by the Environmental Protection Agency, or the EPA, prohibit the discharge of produced water and sand, drilling fluids, drill cuttings and certain other substances related to the natural gas and oil industry into coastal waters. The EPA has also adopted regulations requiring certain natural gas and oil exploration and production facilities to obtain permits for storm water discharges. Compliance with environmental regulations and permit requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse affect on our operations and financial condition.

Climate change and global warming concerns could lead to additional regulatory measures that may adversely impact our operations and financial condition.

Our E&P operations are currently focused on the production of hydrocarbons from unconventional sources, and we expect to continue to focus on such resources in the future. The production of hydrocarbons from these sources has an energy intensity that is a number of times higher than that for production from conventional sources. Therefore, we expect that the carbon dioxide, or CO2, intensity of our production will increase in the long-term. We actively seek to reduce the environmental impact of our operations by pursuing more efficient use of natural resources such as hydrocarbons and water and managing and mitigating the emissions to the air, water and soil, with a focus on the reduction of greenhouse gas emissions. With the efforts of our Health, Safety and Environmental Department, we have been able to plan for and comply with environmental initiatives without materially altering our operating strategy. We anticipate making increased expenditures of both a capital and expense nature as a result of the increasingly stringent laws relating to the protection of the environment that will increase the cost of equipment, materials and services whose production utilizes hydrocarbons. We may also face increased competition from alternative energy sources that do not rely on hydrocarbons. We cannot predict with any reasonable degree of certainty our future exposure concerning such matters and if we are unable to find solutions to environmental initiatives as they arise, including reducing the CO2 emissions for our existing projects, we may have additional costs as well as compliance and operational risks with respect to our existing operations as well as facing difficulties in pursuing new projects.

Our certificate of incorporation and, bylaws contain provisions that could make it more difficult for someone to either acquire us or affect a change of control.

Certain provisions of our certificate of incorporation and bylaws, together with any stockholder rights plan that we might have in place, could discourage an effort to acquire us, gain control of the company, or replace members of our executive management team. These provisions could potentially deprive our stockholders of opportunities to sell shares of our common stock at above-market prices.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

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ITEM 2.  PROPERTIES

The summary of our oil and natural gas reserves as of fiscal year-end 2011 based on average fiscal-year prices, as required by Item 1202 of Regulation S-K, is included in the table headed “2011 Proved Reserves by Category and Summary Operating Data” in “Business – Exploration and Production – Our Proved Reserves” in Item 1 of this Form 10-K and incorporated by reference into this Item 2.  Our proved reserves are based upon estimates prepared for each of our properties annually by the reservoir engineers assigned to the asset management team in the geographic locations in which the property is located. These estimates are reviewed by senior engineers who are not part of the asset management teams and by our Manager – Capital Budgeting & Reserves, who was the technical person primarily responsible for overseeing the preparation of our reserves estimates, who reports to the Senior Vice President – Corporate Development.  Our Manager – Capital Budgeting & Reserves has more than eight years of experience in petroleum engineering, including the estimation of oil and natural gas reserves and holds a Bachelor of Science in Chemical Engineering and a Masters in Business Administration.  Prior to joining us in 2007, our Manager – Capital Budgeting & Reserves served in various reservoir engineering roles for Exxon-Mobil Corporation and is a member of the Society of Petroleum Engineers.  Our Senior Vice President – Corporate Development has more than 30 years of experience in reservoir engineering including the estimation of oil and gas reserves in multiple basins both in the United States and internationally. Prior to joining Southwestern in 2008, our Senior Vice President – Corporate Development served in various engineering and senior management roles for Tenneco Oil Company, Enron Oil & Gas Company (“EOG Resources”), Enron Global Exploration & Production, El Paso Energy and The Houston Exploration Company, and is a member of the Society of Petroleum Engineers, IPAA, Tipro and the Houston Producer’s Forum. On our behalf, the Senior Vice President – Corporate Development engages Netherland, Sewell & Associates, Inc., or NSAI, a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies, to independently audit our proved reserves estimates. NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-002699. Within NSAI, the two technical persons primarily responsible for auditing our proved reserves estimates (1) have over 25 years and over 10 years of practical experience in petroleum geosciences and petroleum engineering, respectively; (2) have over 21 years and over 10 years of experience in the estimation and evaluation of reserves, respectively; (3) each have college degrees; (4) each is a Licensed Professional Geoscientist in the State of Texas or a Licensed Professional Engineer in the State of Texas; (5) each meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; and (6) each is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines. The financial data included in the reserve estimates are also separately reviewed by our accounting staff. Our proved reserves estimates, as internally reviewed and audited by NSAI, are submitted for review and approval to our Chief Executive Officer.  Finally, upon his approval, NSAI reports the results of its reserve audit to the Board of Directors and final authority over the estimates of our proved reserves rests with our Board of Directors.  A copy of NSAI's report has been filed as Exhibit 99.1 to this Form 10-K.  

The information regarding our proved undeveloped reserves required by Item 1203 of Regulation S-K is included under the heading “Proved Undeveloped Reserves” in “Business – Exploration and Production – Our Proved Reserves” in Item 1 of this Form 10-K.

The information regarding delivery commitments required by Item 1207 of Regulation S-K is included under the heading “Sales, Delivery Commitments and Customers” in the “Business – Exploration and Production – Our Operations” in Item 1 of this Form 10-K and incorporated by reference into this Item 2. For additional information about our natural gas and oil operations, we refer you to Note 4 to the consolidated financial statements.  For information concerning capital investments, we refer you to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital Investments.”  We also refer you to Item 6, “Selected Financial Data” in Part II of this Form 10-K for information concerning natural gas and oil produced.

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The information regarding oil and gas properties, wells, operations and acreage required by Item 1208 of Regulation S-K is set forth below:

Leasehold acreage as of December 31, 2011:

	Undeveloped		Developed
	Gross	Net	Gross	Net
Fayetteville Shale Play(1)	554,240	360,473	743,680	440,313
Marcellus Shale Play(2)	197,743	180,676	6,254	6,217
Ark-La-Tex:
Conventional Arkoma(3)	234,062	138,191	255,123	181,359
East Texas(4)	37,628	27,281	91,844	63,801
New Ventures:
USA New Ventures – LSBD(5)	750,000	520,619	-	-
USA New Ventures – Other(6)	730,875	561,177	-	-
Canada New Ventures(7)	2,518,518	2,518,518	-	-
	5,023,066	4,306,935	1,096,901	691,690

(1)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 2,804 net acres in 2012, 208,563 net acres in 2013, which includes 184,696 net acres held on federal lands, and 23,800 net acres in 2014.

(2)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 58,210 net acres in 2012, 44,551 net acres in 2013 and 10,071 net acres in 2014.

(3)

Includes 123,442 net developed acres and 1,614 net undeveloped acres in the Arkoma Basin that are also within our Fayetteville Shale focus area but not included in the Fayetteville Shale acreage in the table above.  Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 30,025 net acres in 2012, 2,181 net acres in 2013 and 31,769 net acres in 2014.

(4)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 380 net acres in 2012, 790 net acres in 2013 and 77 net acres in 2014.

(5)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 15,860 net acres in 2012, 64,120 net acres in 2013 and 228,660 net acres in 2014.

(6)

Assuming successful wells are not drilled to develop the acreage and leases are not extended, leasehold expiring over the next three years will be 1,200 net acres in 2012, 1,200 net acres in 2013 and 31,600 net acres in 2014.

(7)

Assuming the options are not extended/exercised by March 2013 then, in such event, 2,518,518 net acres will expire in 2013.

Producing wells as of December 31, 2011(1):

	Natural Gas		Oil		Total		Gross Wells
	Gross	Net	Gross	Net	Gross	Net	Operated
Fayetteville Shale Play	2,735	1,856	-	-	2,735	1,856	2,283
Marcellus Shale Play	30	22	-	-	30	22	23
Ark-La-Tex:
Conventional Arkoma	1,185	574	-	-	1,185	574	554
East Texas	591	452	11	7	602	459	536
	4,541	2,904	11	7	4,552	2,911	3,396

(1)

As of December 31, 2011, there were no producing wells in New Ventures.

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       The information regarding drilling and other exploratory and development activities required by Item 1205 of Regulation S-K is set forth below:

	Exploratory(1)
	Productive Wells		Dry Wells		Total
Year	Gross	Net	Gross	Net	Gross	Net
2011	1.0	0.6	0.0	0.0	1.0	0.6
2010	0.0	0.0	0.0	0.0	0.0	0.0
2009	1.0	0.9	2.0	1.2	3.0	2.1

	Development(1)
	Productive Wells		Dry Wells		Total
Year	Gross	Net	Gross	Net	Gross	Net
2011	446.0	307.7	0.0	0.0	446.0	307.7
2010(2)	483.0	305.5	3.0	1.9	486.0	307.4
2009	418.0	253.6	3.0	1.8	421.0	255.4

(1)

We have not drilled any exploratory or development wells in Canada in the past three years.

(2)

2010 dry wells include 2 gross wells (1.6 net wells) in the Fayetteville Shale play that were plugged and abandoned due to mechanical issues encountered during drilling.

       The following table presents the information regarding our present activities required by Item 1206 of Regulation S-K:

Wells in progress as of December 31, 2011 (1)

	Gross	Net
Drilling:
Exploratory	1.0	1.0
Development	108.0	75.0
Total	109.0	76.0
Completing:
Exploratory	2.0	1.0
Development	150.0	107.4
Total	152.0	108.4
Drilling & Completing:
Exploratory	3.0	2.0
Development	258.0	182.4
Total	261.0	184.4

(1)

As of December 31, 2011, we did not have any drilling activities in Canada.

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The information regarding oil and gas production, production prices and production costs required by Item 1204 of Regulation S-K is set forth below:

Production, Average Sales Price and Average Production Cost:

	For the years ended December 31,
	2011	2010	2009
Natural Gas
Production (Bcf):
Fayetteville Shale	436.8	350.2	243.5
Total	499.4	403.6	299.7
Average gas price per Mcf, including hedges:
Fayetteville Shale	$           4.23	$            4.73	$             5.73
Total	$           4.19	$            4.64	$             5.30
Average gas price per Mcf, excluding hedges:
Fayetteville Shale	$           3.52	$            3.89	$             3.31
Total	$           3.56	$            3.93	$             3.34
Oil
Oil production (MBbls)(1)	97	171	124
Average oil price per Bbl(1)	$         94.08	$          76.84	$           54.99
Average Production Cost
Cost per Mcfe, excluding ad valorem and severance taxes:
Fayetteville Shale	$           0.88	$            0.86	$             0.80
Total	$           0.84	$            0.83	$             0.77

(1)

Our Fayetteville Shale operations did not produce any oil for the years ended December 31, 2011, 2010 and 2009.

During 2011, we were required to file Form 23, “Annual Survey of Domestic Oil and Gas Reserves,” with the U.S. Department of Energy.  The basis for reporting reserves on Form 23 is not comparable to the reserve data included in Note 4 to the consolidated financial statements in Item 8 to this Form 10-K. The primary differences are that Form 23 reports gross reserves, including the royalty owners’ share, and includes reserves for only those properties of which we are the operator.

Miles of Pipe

At December 31, 2011, our Midstream Services segment had 1,791 miles, 25 miles and 13 miles of pipe in its gathering systems located in Arkansas, Texas, and Pennsylvania, respectively.

Title to Properties

We believe that we have satisfactory title to substantially all of our active properties in accordance with standards generally accepted in the oil and natural gas industry.  Our properties are subject to customary royalty and overriding royalty interests, certain contracts relating to the exploration, development, operation and marketing of production from such properties, consents to assignment and preferential purchase rights, liens for current taxes, applicable laws and other burdens, encumbrances and irregularities in title, which we believe do not materially interfere with the use of or affect the value of such properties.  Prior to acquiring undeveloped properties, we endeavor to perform a title investigation that is thorough but less vigorous than that we endeavor to conduct prior to drilling, which is consistent with standard practice in the oil and natural gas industry.  Generally, before we commence drilling operations on properties that we operate, we endeavor to conduct a thorough title examination and perform curative work with respect to significant defects before proceeding with operations.  We believe that we have performed a thorough title examination with respect to substantially all of our active properties that we operate.

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ITEM 3.  LEGAL PROCEEDINGS  

We are subject to laws and regulations relating to the protection of the environment. Our policy is to accrue environmental and cleanup related costs of a non-capital nature 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, and cash flows.   

In February 2009, SEPCO was added as a defendant in a Third Amended Petition in the matter of Tovah Energy, LLC and Toby Berry-Helfand v. David Michael Grimes, et, al.  In the Sixth Amended Petition, filed in July 2010, in the 273rd District Court in Shelby County, Texas (collectively, the “Sixth Petition”), plaintiff alleged that, in 2005, they provided SEPCO with proprietary data regarding two prospects in the James Lime formation pursuant to a confidentiality agreement and that SEPCO refused to return the proprietary data to the plaintiff, subsequently acquired leases based upon such proprietary data and profited therefrom.  Among other things, the plaintiff’s allegations in the Sixth Petition included various statutory and common law claims, including, but not limited to claims of misappropriation of trade secrets, violation of the Texas Theft Liability Act, breach of fiduciary duty and confidential relationships, various fraud based claims and breach of contract, including a claim of breach of a purported right of first refusal on all interests acquired by SEPCO between February 15, 2005 and February 15, 2006.  In the Sixth Petition, plaintiff sought actual damages of over $55 million as well as other remedies, including special damages and punitive damages of four times the amount of actual damages established at trial.

Immediately before the commencement of the trial in November 2010, plaintiff was permitted, over SEPCO’s objections, to file a Seventh Amended Petition claiming actual damages of $46 million and also seeking the equitable remedy of disgorgement of all profits for the misappropriation of trade secrets and the breach of fiduciary duty claims. In December 2010, the jury found in favor of the plaintiff with respect to all of the statutory and common law claims and awarded $11.4 million in compensatory damages. The jury did not, however, award the plaintiff any special, punitive or other damages. In addition, the jury separately determined that SEPCO’s profits for purposes of disgorgement were $381.5 million. This profit determination does not constitute a judgment or an award. The plaintiff’s entitlement to disgorgement of profits as an equitable remedy will be determined by the judge and it is within the judge’s discretion to award none, some or all the amount of profit to the plaintiff.  On December 31, 2010, the plaintiff filed a motion to enter the judgment based on the jury’s verdict.  On February 11, 2011, SEPCO filed a motion for a judgment notwithstanding the verdict and a motion to disregard certain findings.  On March 11, 2011, the plaintiff filed an amended motion for judgment and intervenor filed its motion for judgment seeking not only the monetary damages and the profits determined by the jury but also seeking, as a new remedy, a constructive trust for profits from 143 wells as well as future drilling and sales of properties in the prospect areas.  A hearing on the post-verdict motions was held on March 14, 2011.  At the suggestion of the judge, all parties voluntarily agreed to participate in non-binding mediation efforts.  The mediation occurred on April 6, 2011 and was unsuccessful. On June 6, 2011, SEPCO received by mail a letter dated June 2, 2011 from the judge, in which he made certain rulings with respect to the post-verdict motions and responses filed by the parties. In his rulings, the judge denied SEPCO’s motion for judgment, judgment notwithstanding the verdict and to disregard certain findings. Plaintiff’s and intervenor’s claim for a constructive trust was denied but the judge ruled that plaintiff and intervenor shall recover from SEPCO $11.4 million and a reasonable attorney’s fee of 40% of the total damages awarded and are entitled to recover on their claim for disgorgement.  The judge instructed that SEPCO calculate the profit on the designated wells for each respective period.  SEPCO performed the calculation and provided it to the judge in June 2011.  On July 5, 2011, plaintiff and intervenor filed a letter with the court raising objections to the accounting provided by SEPCO, to which SEPCO filed a response on July 11, 2011.  On July 12, 2011, the judge sent a letter to the parties in which he ruled that after reviewing the parties’ respective position letters, he was awarding $23.9 million in disgorgement damages in favor of the plaintiff and intervenor.  In the July 12, 2011 letter, the judge instructed the plaintiff and intervenor to prepare a judgment for his approval prior to July 21, 2011 consistent with his findings in his June 2, 2011 letter and the disgorgement award.  On August 24, 2011, a judgment was entered pursuant to which plaintiff and intervenor are entitled to recover approximately $11.4 million in actual damages and approximately $23.9 million in disgorgement as well as prejudgment interest and attorneys' fees which currently are estimated to be up to $8.9 million and all costs of court of the plaintiff and intervenor.  On September 22, 2011, the plaintiff and intervenor filed a motion to modify, correct or reform the judgment which requested that the court vacate the final judgment ordering SEPCO to produce additional accounting information and reconsider the amount SEPCO should disgorge.  On September 23, 2011, SEPCO filed a motion for a new trial and on November 18, 2011 filed a notice of appeal.  On November 30, 2011, the court approved SEPCO’s supersedeas bond in the amount of $14.1 million, which stays execution on the judgment pending appeal.  The bond covers the $11.4 million judgment for actual damages, plus $1.3 million in pre-judgment interest, $1.3 million in post-judgment interest (estimating two years for the duration of appeal), and court costs.  

The Company believes that SEPCO has a number of legal grounds for appealing the judgment, all of which will be vigorously pursued.  Based on the Company's understanding and judgment of the facts and merits of this case, including

42 SWN

appellate defenses, and after considering the advice of counsel, the Company has determined that, although reasonably possible after exhaustion of all appeals, an adverse final outcome to this lawsuit is not probable.  As such, the Company has not accrued any amounts with respect to this lawsuit.  If the plaintiff and intervenor were to ultimately prevail in the appellate process, the Company currently estimates, based on the judgments to date, that SEPCO’s potential liability would be up to $44.2 million, including interest and attorney’s fees.  The Company’s assessment may change in the future due to occurrence of certain events, such as denied appeals, and such re-assessment could lead to the determination that the potential liability is probable and could be material to the Company's results of operations, financial position or cash flows.

On February 20, 2012, the Company became aware that SEPCO was named as a defendant in the matter of Gery Muncey v. Southwestern Energy Production Company, et al filed in the District Court of San Augustine County in Texas on January 31, 2012.  The plaintiff in this case is also the intervenor in the Tovah Energy matter described above and alleges various claims including fraud, misappropriation and breach of fiduciary duty that are purported as independent of the claims alleged in the Tovah Energy matter but arise from the substantially same circumstances involved in the Tovah Energy matter.  The plaintiff is seeking value for various royalty and override ownership interests in wells drilled, disgorgement of profits and punitive damages.  The Company has not accrued any amounts with respect to this lawsuit and cannot reasonably estimate the amount of any potential liability based on the Company’s understanding and judgment of the facts and merits of this case.

In March 2010, the Company’s subsidiary, SEECO, Inc., was served with a subpoena from a federal grand jury in Little Rock, Arkansas.  Based on the documents requested under the subpoena and subsequent discussions described below, the Company believes the grand jury is investigating matters involving approximately 27 horizontal wells operated by SEECO in Arkansas, including whether appropriate leases or permits were obtained therefor and whether royalties and other production attributable to federal lands have been properly accounted for and paid.  The Company believes it has fully complied with all requests related to the federal subpoena and delivered its affidavit to that effect. The Company and representatives of the Bureau of Land Management and the U.S. Attorney have had discussions since the production of the documents pursuant to the subpoena.  In January 2011, the Company voluntarily produced additional materials informally requested by the government arising from these discussions.  Although, to the Company’s knowledge, no proceeding in this matter has been initiated against SEECO, the Company cannot predict whether or when one might be initiated. The Company intends to fully comply with any further requests and to cooperate with any related investigation. No assurance can be made as to the time or resources that will need to be devoted to this inquiry or the impact of the final outcome of the discussions or any related proceeding.

We are subject to various litigation, claims and proceedings that have arisen in the ordinary course of business. Management believes, individually or in aggregate, such litigation, claims and proceedings will not have a material adverse impact on our financial position or our results of operations but these matters are subject to inherent uncertainties and management’s view may change in the future. If an unfavorable final outcome were to occur, there exists the possibility of a material impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. We accrue for such items when a liability is both probable and the amount can be reasonably estimated.

ITEM 4.  MINE SAFETY DISCLOSURES

 Our sand mining operations, in support of our E&P business, are subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by 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 Form 10-K.

43 SWN

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the New York Stock Exchange under the symbol “SWN.”  On February 23, 2012, the closing price of our stock was $35.40 and we had 3,070 stockholders of record.  The following table presents the high and low sales prices for closing market transactions as reported on the New York Stock Exchange.

	Range of Market Prices
Quarter Ended	2011		2010		2009
March 31	$   43.49	$   36.12	$    51.65	$    37.70	$    34.14	$    25.99
June 30	$   43.86	$   38.02	$    44.99	$    35.86	$    45.65	$    30.01
September 30	$   49.00	$   33.33	$    38.83	$    31.44	$    45.08	$    35.39
December 31	$   44.21	$   31.94	$    38.45	$    32.73	$    50.62	$    40.28

We have indefinitely suspended payment of quarterly cash dividends on our common stock.

Issuer Purchases of Equity Securities

During 2011, we retired 7,220 shares for the payment of withholding taxes due on employee stock plan share issuances.  All changes in common stock in treasury in 2011 were due to purchases and sales of shares held on behalf of participants in a non-qualified deferred compensation supplemental retirement savings plan. We refer you to Note 1 to our consolidated financial statements in Item 8 of Part II.  

Recent Sales of Unregistered Equity Securities

We did not sell any unregistered equity securities during 2011.

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STOCK PERFORMANCE GRAPH

The following graph compares, for the last five years, the performance of our common stock to the S&P 500 Index and the Dow Jones U.S. Exploration & Production Index.  The chart assumes that the value of the investment in our common stock and each index was $100 at December 31, 2006, and that all dividends were reinvested.  The stock performance shown on the graph below is not indicative of future price performance.

	Southwestern Energy Company		Dow Jones U.S. Exploration & Production
	S&P 500 Index

	12/31/06	12/31/07	12/31/08	12/31/09	12/31/10	12/31/11
Southwestern Energy Company	100	159	165	275	214	182
Dow Jones U.S. Exploration & Production	100	105	66	84	97	99
S&P 500 Index	100	144	86	121	141	135

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth a summary of selected historical financial information for each of the years in the five-year period ended December 31, 2011. This information and the notes thereto are derived from our consolidated financial statements. We refer you to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements and Supplementary Data.”

	2011	2010	2009	2008	2007
	(in thousands except share, per share, stockholder data and percentages)
Financial Review
Operating revenues:
Exploration and production	$  2,100,488	$    1,890,444	$    1,593,231	$    1,491,302	$       795,944
Midstream services	2,859,519	2,453,840	1,603,332	2,173,971	961,994
Gas distribution and other	3,268	984	687	118,399	174,914
Intersegment revenues	(2,010,369)	(1,734,605)	(1,051,471)	(1,472,120)	(677,721)
	2,952,906	2,610,663	2,145,779	2,311,552	1,255,131
Operating costs and expenses:
Gas purchases – midstream services	709,091	611,161	482,836	710,129	306,336
Gas purchases – gas distribution	—	—	—	61,439	85,445
Operating and general	398,985	337,334	259,159	209,536	166,095
Depreciation, depletion and amortization	704,511	590,332	493,658	414,408	293,914
Impairment of natural gas and oil properties	—	—	907,812	—	—
Taxes, other than income taxes	65,518	50,608	37,280	29,272	21,875
	1,878,105	1,589,435	2,180,745	1,424,784	873,665
Operating income (loss)	1,074,801	1,021,228	(34,966)	886,768	381,466
Interest expense, net	24,075	26,163	18,638	28,904	23,873
Other income (loss), net	264	427	1,449	4,404	(219)
Gain on sale of utility assets	—	—	—	57,264	—
Income (loss) before income taxes	1,050,990	995,492	(52,155)	919,532	357,374
Provision (benefit) for income taxes:
Current	4,198	11,939	(64,969)	122,000	—
Deferred	409,023	379,720	48,606	228,999	135,855
	413,221	391,659	(16,363)	350,999	135,855
Net income (loss)	637,769	603,833	(35,792)	568,533	221,519
Less: net income (loss) attributable to noncontrolling interest	—	(285)	(142)	587	345
Net income (loss) attributable to Southwestern Energy	$     637,769	$       604,118	$        (35,650)	$       567,946	$       221,174
Return on equity(1)	16.1%	20.4%	(1.5%)	22.6%	13.3%
Net cash provided by operating activities	$ 1,739,817	$    1,642,585	$    1,359,376	$    1,160,809	$       622,735
Net cash used in investing activities	$(2,024,790)	$  (1,725,631)	$   (1,780,604)	$     (792,078)	$  (1,513,497)
Net cash provided by (used in) financing activities	$     284,303	$         86,240	$       238,135	$     (174,286)	$       849,667
Common Stock Statistics (2)
Earnings per share:
Net income (loss) attributable to Southwestern stockholders – Basic	$            1.84	$             1.75	$            (0.10)	$             1.66	$             0.65
Net income (loss) attributable to Southwestern stockholders – Diluted	$            1.82	$             1.73	$            (0.10)	$             1.64	$             0.64
Cash dividends declared and paid per share	$                —	$                —	$                —	$                —	$                —
Book value per average diluted share(1)	$          11.34	$             8.49	$             6.82	$             7.27	$             4.77
Market price at year-end	$          31.94	$           37.43	$           48.20	$           28.97	$           27.86
Number of stockholders of record at year-end	3,083	3,043	2,639	2,497	2,275
Average diluted shares outstanding	349,921,413	349,310,666	343,420,568	346,245,938	347,442,660

(1)

The return on equity and the book value per average diluted share calculations have been recalculated for 2008 and 2007 and now include an addition to equity for the Company’s noncontrolling interest in partnership.

(2)

Share and per share amounts in 2007 have been restated to reflect the two-for-one stock split effected in March 2008.  

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	2011	2010	2009	2008	2007
Capitalization (in thousands)
Total debt	$  1,343,300	$    1,094,200	$        998,700	$       735,400	$       978,800
Total equity	3,969,304	2,964,876	2,340,981	2,517,963	1,657,070
Total capitalization	$  5,312,604	$    4,059,076	$     3,339,681	$    3,253,363	$    2,635,870
Total assets	$  7,902,897	$    6,017,463	$     4,770,250	$    4,760,158	$    3,622,716
Capitalization ratios:
Debt	25.3%	27.0%	29.9%	22.6%	37.1%
Equity	74.7%	73.0%	70.1%	77.4%	62.9%
Capital Investments (in millions) (1)
Exploration and production	1,977.5	1,775.5	1,565.5	1,595.8	1,379.7
Midstream services	160.8	271.3	214.2	183.0	107.4
Other	68.9	73.3	29.4	17.4	16.0
	$      2,207.2	$        2,120.1	$        1,809.1	$        1,796.2	$        1,503.1
Exploration and Production
Natural gas:
Production, Bcf	499.4	403.6	299.7	192.3	109.9
Average price per Mcf, including hedges	$            4.19	$             4.64	$              5.30	$             7.52	$             6.80
Average price per Mcf, excluding hedges	$            3.56	$             3.93	$              3.34	$             7.73	$             6.16
Oil:
Production, MBbls	97	171	124	385	614
Average price per barrel, including hedges	$          94.08	$           76.84	$            54.99	$         107.18	$           69.12
Average price per barrel, excluding hedges	$          94.08	$           76.84	$            54.99	$         107.18	$           69.12
Total natural gas and oil production, Bcfe	500.0	404.7	300.4	194.6	113.6
Lease operating expenses per Mcfe	$            0.84	$             0.83	$              0.77	$             0.89	$             0.73
General and administrative expenses per Mcfe	$            0.27	$             0.30	$              0.35	$             0.41	$             0.48
Taxes, other than income taxes per Mcfe	$            0.11	$             0.11	$              0.11	$             0.13	$             0.16
Proved reserves at year-end:
Natural gas, Bcf	5,887	4,930	3,650	2,176	1,397
Oil, MMBbls	1	1	1	2	9
Total reserves, Bcfe	5,893	4,937	3,657	2,185	1,450
Midstream Services
Gas volumes marketed, Bcf	611.4	495.8	382.5	258.0	145.7
Gas volumes gathered, Bcf	745.7	588.3	387.1	224.1	78.7

(1)

Capital investments include increases of $4.3 million for 2011, $14.4 million for 2010, $12.2 million for 2009, $36.2 million for 2008 and a reduction of $20.6 million for 2007 related to the change in accrued expenditures between years.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-K contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the risks described in the “Cautionary Statement About Forward-Looking Statements” below, in Item 1A, “Risk Factors” in Part I and elsewhere in this annual report. You should read the following discussion with the “Item 6. Selected Financial Data” and our consolidated financial statements and the related notes included in this Form 10-K.

OVERVIEW

Background

Southwestern Energy Company is an independent energy company engaged in natural gas and crude oil exploration, development and production (E&P). We are also focused on creating and capturing additional value through our natural gas gathering and marketing businesses, which we refer to as Midstream Services. We operate principally in two segments: E&P and Midstream Services.    

Our primary business is the exploration for and production of natural gas and oil, with our current operations being principally focused within the United States on development of an unconventional gas reservoir located on the Arkansas side of the Arkoma Basin, which we refer to as the Fayetteville Shale play.  We are also actively engaged in exploration and production activities in Pennsylvania, where we are targeting the unconventional gas reservoir known as the Marcellus Shale, and to a lesser extent in Texas and in Arkansas and Oklahoma in the Arkoma Basin.  We have recently commenced exploration operations in Arkansas and Louisiana testing an unconventional oil play targeting the Lower Smackover Brown Dense formation.  In 2010, we commenced an exploration program in New Brunswick, Canada, which represents our first operations outside of the United States.

We are focused on providing long-term growth in the net asset value of our business, which we achieve in our E&P business through the drillbit. We derive the vast majority of our operating income and cash flow from the natural gas production of our E&P business and expect this to continue in the future. We expect that growth in our operating income and revenues will primarily depend on natural gas prices and our ability to increase our natural gas production. We expect our natural gas production volumes will continue to increase due to our ongoing development of the Fayetteville Shale play in Arkansas and the Marcellus Shale play in Pennsylvania. The price we expect to receive for our natural gas is a critical factor in the capital investments we make in order to develop our properties and increase our production.  In recent years, there has been a significant decline in natural gas prices as evidenced by New York Mercantile Exchange (“NYMEX”) natural gas prices ranging from a high of $13.58 per MMBtu in 2008 to a recent low of $2.32 per MMBtu in January 2012.  Natural gas prices fluctuate due to a variety of factors we cannot control or predict. These factors, which include increased supplies of natural gas due to greater exploration and development activities, weather conditions, political and economic events, and competition from other energy sources, impact supply and demand for natural gas, which in turn determines the sale prices for our production. In addition to the factors identified above, the prices we realize for our production are affected by our hedging activities as well as locational differences in market prices.

Recent Financial and Operating Results

We reported net income attributable to Southwestern Energy of $637.8 million in 2011, or $1.82 per diluted share, up from net income attributable to Southwestern Energy of $604.1 million in 2010, or $1.73 per diluted share.  We reported a net loss attributable to Southwestern Energy of $35.7 million, or $0.10 per diluted share, in 2009. The loss in 2009 included a $907.8 million, or $558.3 million net of taxes, non-cash ceiling test impairment of our United States natural gas and oil properties that resulted from a significant decline in natural gas prices during the first quarter of 2009.  Our cash flow from operating activities increased 6% to $1,739.8 million in 2011 due to an increase in net income adjusted for non-cash expenses which was partially offset by changes in working capital accounts, and increased 21% to $1,642.6 million in 2010 due to an increase in net income adjusted for non-cash expenses and changes in working capital.

        In 2011, our natural gas and oil production increased 24% to 500.0 Bcfe, up from 404.7 Bcfe in 2010.  The 95.3 Bcfe increase in our 2011 production resulted from a 86.6 Bcf increase in net production from our Fayetteville Shale play and a 22.4 Bcf increase in net production from our Marcellus Shale properties, which more than offset a combined 13.7 Bcfe decrease in net production from our East Texas and Arkoma Basin properties. In 2010, our natural gas and oil production increased to 404.7 Bcfe, up from 300.4 Bcfe in 2009.  We are targeting 2012 natural gas and oil production of 560 to 570 Bcfe, an increase of approximately 13% over our 2011 production, using midpoints.  Our year-end reserves

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grew 19% in 2011 to 5,893 Bcfe, up from 4,937 Bcfe at the end of 2010 and 3,657 Bcfe at the end of 2009, primarily as a result of the continued development of our Fayetteville Shale play and Marcellus Shale play.

Our E&P segment reported operating income of $825.1 million in 2011, down from $829.5 million in 2010. Operating income in 2011 decreased $4.4 million over 2010 as the revenue impact of our 24% increase in production was more than offset by the 10% decline in our average realized gas prices and a $214.4 million increase in operating costs that resulted from our significant production growth.  We recorded operating income from our E&P segment of $829.5 million in 2010, up from an operating loss of $157.7 million in 2009. The operating loss in 2009 included a $907.8 million non-cash ceiling test impairment of our United States natural gas and oil properties.  Excluding the $907.8 million non-cash ceiling test impairment, operating income in 2010 increased $79.4 million over 2009 as a result of the revenue impact of our 35% increase in production which was partially offset by the 12% decline in our average realized gas prices and a $217.8 million increase in operating costs and expenses that resulted from our significant production growth.

Operating income for our Midstream Services segment was $248.0 million in 2011, up from $191.6 million in 2010 and $122.6 million in 2009. Operating income for our Midstream Services segment increased in 2011 due to an increase of $92.2 million in gathering revenues and an increase of $5.8 million in the margin generated from our natural gas marketing activities, which were partially offset by a $41.6 million increase in operating costs and expenses, exclusive of gas purchase costs, that resulted from our continued significant growth in volumes gathered. Volumes gathered grew to 745.7 Bcf in 2011 compared to 588.3 Bcf in 2010. Operating income for our Midstream Services segment increased in 2010 due to an increase of $110.4 million in gathering revenues and an increase of $5.5 million in the margin generated from our natural gas marketing activities, which were partially offset by a $46.9 million increase in operating costs and expenses, exclusive of gas purchase costs, that resulted from our significant growth in volumes gathered. Volumes gathered grew to 588.3 Bcf in 2010 compared to 387.1 Bcf in 2009.

We had total capital investments of $2,207.2 million in 2011, compared to $2,120.1 million in 2010 and $1,809.1 million in 2009.  Of our total capital investments, $1,977.5 million was invested in our E&P segment in 2011 compared to $1,775.5 million and $1,565.5 million invested in our E&P segment in 2010 and 2009, respectively.

Outlook

We believe the outlook for our business is favorable despite the continued uncertainty of natural gas prices in the United States and the legislative and regulatory challenges facing our industry. Our resource base, financial strength and disciplined investment of capital provide us with an opportunity to exploit and develop our position in the Fayetteville Shale play and Marcellus Shale play, maximize efficiency through economies of scale in our key operating areas, enhance our overall returns through expansion of our Midstream Services operations and grow through new exploration and development activities. Our capital investment plan for 2012 is flexible and is based on our expectation that natural gas prices will remain at current price levels.  Should prices decline materially from their current levels we will adjust our capital investment plans accordingly.  

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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. Interest expense, interest income, income tax expense and stock-based compensation are discussed on a consolidated basis.

Exploration and Production

	Year Ended December 31,
	2011	2010	2009
Revenues (in thousands)	$   2,100,488	$      1,890,444	$      1,593,231
Impairment of natural gas and oil properties (in thousands)	$                —	$                 —	$         907,812
Operating costs and expenses (in thousands)	$   1,275,350	$      1,060,982	$         843,144
Operating income (loss) (in thousands)	$      825,138	$         829,462	$       (157,725)
Natural gas production (Bcf)	499.4	403.6	299.7
Oil production (MBbls)	97	171	124
Total production (Bcfe)	500.0	404.7	300.4
Average gas price per Mcf, including hedges	$              4.19	$               4.64	$               5.30
Average gas price per Mcf, excluding hedges	$              3.56	$               3.93	$               3.34
Average oil price per Bbl	$           94.08	$             76.84	$             54.99
Average unit costs per Mcfe:
Lease operating expenses	$              0.84	$               0.83	$               0.77
General & administrative expenses	$              0.27	$               0.30	$               0.35
Taxes, other than income taxes	$              0.11	$               0.11	$               0.11
Full cost pool amortization	$              1.30	$               1.34	$               1.51

Revenues

Revenues for our E&P segment were up $210.0 million, or 11%, in 2011 compared to 2010. Higher natural gas production volumes in 2011 increased revenues by $445.0 million while lower realized prices for our natural gas production decreased revenue by $227.9 million compared to 2010.  E&P revenues were up $297.2 million, or 19%, in 2010 compared to 2009. Higher natural gas production volumes in 2010 increased revenues by $551.0 million while lower realized prices for our natural gas production decreased revenue by $265.1 million. We expect our natural gas production volumes to continue to increase due to our development of the Fayetteville Shale properties in Arkansas and our Marcellus Shale properties in Pennsylvania.  Natural gas and oil prices are difficult to predict and subject to wide price fluctuations. As of February 23, 2012, we had hedged 266.4 Bcf of our remaining 2012 natural gas production and 185.2 Bcf of our 2013 natural gas production to help limit our exposure to price fluctuations.  For more information about our derivatives and risk management activities, we refer you to Note 5 to the consolidated financial statements included in this Form 10-K and to “Commodity Prices” below for additional information.

Production

In 2011, our natural gas and oil production increased 24% to 500.0 Bcfe, up from 404.7 Bcfe in 2010.  The 95.3 Bcfe increase in our 2011 production resulted from a 86.6 Bcf increase in net production from our Fayetteville Shale play and a 22.4 Bcf increase in net production from our Marcellus Shale properties, which more than offset a combined 13.7 Bcfe decrease in net production from our East Texas and Arkoma Basin properties.  Natural gas and oil production was up approximately 35% to 404.7 Bcfe in 2010, as compared to 2009, due to a 106.7 Bcf increase in net production from our Fayetteville Shale play and a 1.0 Bcf increase in net production from our Marcellus Shale properties, which more than offset a combined 3.4 Bcfe decrease in net production from out East Texas and Arkoma Basin properties.  Our net production from the Fayetteville Shale play was 436.8 Bcf in 2011, up from 350.2 Bcf in 2010 and 243.5 Bcf in 2009.

We are targeting 2012 natural gas and oil production of 560 to 570 Bcfe, an increase of approximately 13% over our 2011 production, using midpoints. Approximately 465 to 470 Bcf of our 2012 targeted natural gas production is projected to come from our activities in the Fayetteville Shale play. Although we expect production volumes in 2012 to increase, we cannot guarantee our success in discovering, developing and producing reserves, including with respect to our Fayetteville Shale play. Our ability to discover, develop and produce reserves is dependent upon a number of factors, many of which

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are beyond our control, including the availability of capital, the timing and extent of changes in natural gas and oil prices and competition. There are also many risks inherent in the discovery, development and production of natural gas and oil. We refer you to “Risk Factors” in Item 1A of Part I of this Form 10-K for a discussion of these risks and the impact they could have on our financial condition and results of operations.

Commodity Prices

The average price realized for our natural gas production, including the effects of hedges, decreased 10% to $4.19 per Mcf in 2011 and decreased 12% to $4.64 per Mcf in 2010. The decrease in the average price realized in 2011 compared to 2010 primarily reflects the decrease in average market prices and to a lesser extent the decreased effect of our natural gas price hedging activities, which had a greater positive impact on our average realized gas price in 2010 (see additional discussion below). The decrease in the average price realized in 2010 compared to 2009 primarily reflected the decrease in average market prices, which was partially offset by the positive effect of our price hedging activities in 2010.  We periodically enter into various hedging and other financial arrangements with respect to a portion of our projected natural gas and crude oil 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 7A of this Form 10-K, Note 5 to the consolidated financial statements, and our hedge risk factor for additional discussion about our derivatives and risk management activities).

Our hedging activities increased the average gas price $0.63 per Mcf in 2011, compared to an increase of $0.71 per Mcf in 2010 and an increase of $1.96 per Mcf in 2009. Disregarding the impact of hedges, the average price received for our natural gas production in 2011 was $0.37 per Mcf lower than 2010 and $0.48 lower than the average monthly NYMEX settlement price for 2011.

 At December 31, 2011, we had basis protected on approximately 269.4 Bcf of our 2012 expected natural gas production through financial hedging activities and physical sales arrangements at a basis differential to NYMEX gas prices of approximately $0.02 per Mcf.

In addition to the basis hedges discussed above, at December 31, 2011, we had NYMEX fixed price hedges in place on notional volumes of 185.9 Bcf of our remaining 2012 natural gas production at an average price of $5.02 per MMBtu and collars in place on notional volumes of 80.5 Bcf of our 2012 natural gas production at an average floor and ceiling price of $5.50 and $6.67 per MMBtu, respectively. At December 31, 2011, we had NYMEX fixed price hedges in place on notional volumes of 185.2 Bcf of our 2013 natural gas production.

Our E&P segment receives a sales price for our natural gas at a discount to average monthly NYMEX settlement prices due to locational basis differentials, while transportation charges and fuel charges also reduce the price received. Assuming a NYMEX commodity price of $3.00 per Mcf for 2012, and disregarding the impact of hedges, we expect our total gas sales discount to NYMEX to be $0.45 to $0.55 per Mcf.

We realized an average price of $94.08 per barrel for our oil production for the year ended December 31, 2011, up approximately 22% from the prior year. The 2010 average realized price of $76.84 per barrel was up 40% from 2009. We did not hedge any of our 2011, 2010 or 2009 oil production.

Operating Income

Operating income from our E&P segment decreased $4.4 million to $825.1 million in 2011 from $829.5 million in 2010 as the revenue impact of our 24% increase in production was more than offset by the 10% decrease in our average realized gas prices and a $214.4 million increase in operating costs that resulted from our significant production growth. We recorded an operating loss from our E&P segment of $157.7 million in 2009.  The operating loss in 2009 includes a $907.8 million non-cash ceiling test impairment of our United States natural gas and oil properties that resulted from a significant decline in natural gas prices during the first quarter of 2009. Excluding the $907.8 million non-cash ceiling test impairment, operating income in 2010 increased $79.4 million over 2009 as a result of the revenue impact of our 35% increase in production which was partially offset by a 12% decline in our average realized gas prices and a $217.8 million increase in operating costs and expenses that resulted from our significant production growth.  

Operating Costs and Expenses

Lease operating expenses per Mcfe for the E&P segment were $0.84 in 2011, compared to $0.83 in 2010 and $0.77 in 2009. Lease operating expenses per unit of production increased in 2011 primarily due to increased gathering costs associated with our Fayetteville Shale operations. Lease operating expenses per unit of production increased in 2010

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compared to 2009 primarily due to increased gathering, compression and water disposal costs associated with our Fayetteville Shale operations.  We expect our per unit operating cost for this segment to range between $0.86 and $0.90 per Mcfe in 2012.

General and administrative expenses for the E&P segment were $0.27 per Mcfe in 2011, down from $0.30 per Mcfe in 2010 and $0.35 per Mcfe in 2009. The decreases in general and administrative costs per Mcfe in 2011 and 2010 were due to the effects of our increased production volumes. In total, general and administrative expenses for the E&P segment were $134.8 million in 2011, $120.3 million in 2010 and $105.0 million in 2009. The increases in general and administrative expenses since 2009 were primarily a result of increased payroll, incentive compensation, employee-related costs and professional fees associated with the expansion of our E&P operations due to the continued development of the Fayetteville Shale play and Marcellus Shale play. These increases accounted for $11.1 million, or 76%, of the 2011 increase and $13.6 million, or 89%, of the 2010 increase. We added 106 new E&P employees during 2011 compared to 253 employees added in 2010.

We expect our per unit cost for general and administrative expenses in 2012 to range between $0.29 and $0.33 per Mcfe.  The expected increase in our per unit general and administrative costs in 2012 is due to general increases in our G&A and increased compensation costs associated with ongoing development of our Fayetteville Shale and Marcellus Shale plays. Future changes in our general and administrative expenses for this segment are primarily dependent upon our salary costs, level of pension expense, amount of stock-based compensation expense and the amount of incentive compensation paid to our employees and level and intensity of our operating activities. For eligible employees, a portion of incentive compensation is based on the achievement of certain operating and performance results, including production, proved reserve additions, present value added for each dollar of capital invested, and lease operating expenses and general and administrative expenses per unit of production, while another portion is discretionary based upon an employee’s performance.

Taxes other than income taxes per Mcfe were $0.11 in 2011, 2010, and 2009, respectively.  Taxes other than income taxes per Mcfe vary from period to period due to changes in severance and ad valorem taxes that result from the mix of our production volumes and fluctuations in commodity prices. Effective January 1, 2009, the State of Arkansas changed the severance tax on natural gas wells to be based on the market value of natural gas produced.  

Our full cost pool amortization rate averaged $1.30 per Mcfe for 2011, $1.34 per Mcfe for 2010 and $1.51 per Mcfe for 2009. The decline in the average amortization rate for 2011 compared to 2010 was primarily the result of lower acquisition and development costs and sale of certain East Texas properties in 2011 and 2010. The decline in the average amortization rate for 2010 compared to 2009 was primarily the result of lower acquisition and development costs combined with the $907.8 million non-cash ceiling test impairment recorded in the first quarter of 2009 and the sale of certain East Texas oil and natural gas leases and wells in the second quarter of 2010 as the proceeds from the sale were appropriately credited to the full cost pool. The amortization rate is impacted by the timing and amount of reserve additions and the costs associated with those additions, revisions of previous reserve estimates due to both price and well performance, write-downs that result from full cost ceiling tests, 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 reserves attributed to our Fayetteville Shale play.

Unevaluated costs excluded from amortization were $942.9 million at the end of 2011 compared to $712.1 million at the end of 2010 and $595.4 million at the end of 2009.  Unevaluated costs excluded from amortization at the end of 2011 included $27.9 million related to our properties in Canada. The increase in unevaluated costs since December 31, 2010 primarily resulted from a $172.9 million increase in our undeveloped leasehold acreage and seismic costs as well as a $103.7 million increase in our drilling activity in our wells in progress. See Note 4 to the consolidated financial statements for additional information regarding our unevaluated costs excluded from amortization.

The timing and amount of production and reserve additions could have a material impact on our per unit costs; if production or reserves additions are lower than projected, our per unit costs could increase.

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Midstream Services

	Year Ended December 31,
	2011	2010	2009
	($ in millions)
Revenues – marketing	$     2,451.3	$       2,137.8	$       1,397.7
Revenues – gathering	$         408.2	$          316.0	$          205.6
Gas purchases – marketing	$     2,418.1	$       2,110.4	$       1,375.8
Operating costs and expenses	$         193.4	$          151.8	$          104.9
Operating income	$         248.0	$          191.6	$          122.6
Gas volumes marketed (Bcf)	611.4	495.8	382.5
Gas volumes gathered (Bcf)	745.7	588.3	387.1

Revenues

Revenues from our marketing activities were up 15% to $2,451.3 million for 2011 compared to 2010. The increase in marketing revenues resulted from increases in the volumes marketed which partially offset a decrease in the prices received for volumes marketed. Revenues from our marketing activities were up 53% to $2,137.8 million for 2010 compared to 2009. The increase in marketing revenues for 2010 resulted from increases in the volumes marketed combined with an increase in the prices received for volumes marketed. The average price received for volumes marketed decreased 7% in 2011 compared to 2010, and increased 18% in 2010 compared to 2009. Volumes marketed increased 23% in 2011 compared to 2010, and increased 30% in 2010 compared to 2009. Of the total volumes marketed, production from our E&P operated wells accounted for 94% in 2011, 95% in 2010 and 92% in 2009. Increases and decreases in marketing revenues due to changes in commodity prices are largely offset by corresponding changes in gas purchase expenses.

Revenues from our gathering activities were up 29% to $408.2 million for 2011 compared to 2010, and were up 54% to $316.0 million for 2010 compared to 2009. The increases in gathering revenues primarily resulted from a 27% increase in gas volumes gathered in 2011 compared to 2010 and a 52% increase in gas volumes gathered in 2010 compared to 2009. Substantially all of the increases in gathering revenues for 2011 and 2010 resulted from increases in the volumes gathered from our operated production from the Fayetteville Shale play. Gathering volumes, revenues and expenses for this segment are expected to continue to grow as production from our Fayetteville Shale and Marcellus Shale plays increase.

Operating Income

Operating income from our Midstream Services segment increased 29% to $248.0 million in 2011 and increased 56% to $191.6 million in 2010. The increases in operating income reflect the substantial increases in gas volumes gathered and marketed which resulted primarily from our increased E&P production volumes. The increase in operating income for 2011 compared to 2010 was due to an increase of $92.2 million in gathering revenues and an increase of $5.8 million in the margin generated from our gas marketing activities, which were partially offset by a $41.6 million increase in operating costs and expenses, exclusive of purchased gas costs.  The increase in operating income for 2010 compared to 2009 was due to a $110.4 million increase in gathering revenues and an increase of $5.5 million in the margin generated from our gas marketing activities, which were partially offset by a $46.9 million increase in operating costs and expenses, exclusive of purchased gas costs.

The margin generated from gas marketing activities was $33.2 million for 2011, compared to $27.4 million for 2010 and $21.9 million for 2009.  Margins are primarily driven by volumes of gas marketed and may fluctuate depending on the prices paid for commodities and the ultimate disposition of those commodities.  The increases in margins generated are primarily the result of a 23% increase in volumes marketed in 2011 and a 30% increase in volumes marketed in 2010, as compared to prior years, resulting from marketing our increased E&P production volumes. We enter into hedging activities from time to time with respect to our gas marketing activities to provide margin protection.  For more information about our derivatives and risk management activities, we refer you to “Quantitative and Qualitative Disclosures about Market Risk” and Note 5 to the consolidated financial statements for additional information.

Interest Expense

Interest expense, net of capitalization, was $24.1 million in 2011, a decrease of $2.1 million compared to 2010, primarily due to a increase in capitalized interest. Interest capitalized increased to $45.7 million in 2011 from $32.9 million in 2010, primarily due to an increase in our weighted average interest rate and average borrowed balance under our credit facility during 2011, which had a weighted average interest rate of 2.06% for 2011 and an increase in our unevaluated

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properties.

In 2010, interest expense, net of capitalization, was $26.2 million, an increase of $7.5 million compared to 2009 primarily due to a decrease in capitalized interest. Interest capitalized decreased to $32.9 million in 2010 from $40.2 million in 2009, primarily due to a decrease in our weighted average interest rate during 2010 as a result of the increase in our average borrowed balance under our credit facility, which had a weighted average interest rate of 1.06% for 2010.

Income Taxes

Our effective tax rate was 39.3% in 2011 and 2010 and 31.5% in 2009.  Our effective tax rate, excluding the $907.8 million non-cash ceiling test impairment of our natural gas and oil properties, would have been 39.0% for 2009. In general, differences between our effective tax rate and the statutory tax rate of 35% primarily result from the effect of certain state income taxes and permanent items attributable to book-tax differences.    

Stock-Based Compensation Expense

We recognized expense of $10.6 million and capitalized $8.5 million for stock-based compensation in 2011, compared to $9.8 million expensed and $6.8 million capitalized in 2010 and $10.2 million expensed and $5.9 million capitalized in 2009. We refer you to Note 1 to the consolidated financial statements for additional discussion of our equity based compensation plans.  

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LIQUIDITY AND CAPITAL RESOURCES

We depend primarily on internally-generated funds, our Credit Facility, sales of non-core assets and funds accessed through debt and equity markets as our primary sources of liquidity.

During 2012, assuming natural gas prices remain at current levels, we expect to draw on a portion of the funds available under the Credit Facility to fund the portion of our planned capital investments (discussed below under “Capital Investments”), that are expected to exceed the net cash generated by our operations.  We refer you to Note 7 to the consolidated financial statements included in this Form 10-K and the section below under “Financing Requirements” for additional discussion of our Credit Facility.

Net cash provided by operating activities increased 6% to $1.7 billion in 2011, due to an increase in net income adjusted for non-cash expenses which was partially offset by changes in working capital accounts.  Net cash provided by operating activities increased 21% to $1.6 billion in 2010, due to an increase in net income adjusted for non-cash expenses and changes in working capital accounts.  For 2011, requirements for our capital investments were funded from our cash generated by operating activities, borrowings under our Credit Facility and the proceeds from the sale of certain East Texas oil and natural gas properties.  Net cash from operating activities provided 80% of our cash requirements for capital investments in 2011, 79% in 2010 and 76% in 2009.

At December 31, 2011, our capital structure consisted of 25% debt and 75% equity. We believe that our operating cash flow and available funds under our Credit Facility will be adequate to meet our capital and operating requirements for 2012. The credit status of the financial institutions participating in our Credit Facility could adversely impact our ability to borrow funds under the Credit Facility. While 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 its obligation.

Our cash flow from operating activities is highly dependent upon the market prices that we receive for our natural gas and oil production. Natural gas and oil prices are subject to wide fluctuations and are driven by market supply and demand factors which are impacted by the overall state of the economy. The price received for our production is also influenced by our commodity hedging activities, as more fully discussed in Note 5 to the consolidated financial statements included in this Form 10-K and Item 7A, “Quantitative and Qualitative Disclosures about Market Risk.” Our commodity hedging activities are subject to the credit risk of our counterparties being financially unable to complete the transaction. We actively monitor the credit status of our counterparties, performing both quantitative and qualitative assessments based on their credit ratings and credit default swap rates where applicable, and to date have not had any credit defaults associated with our transactions. However, any future failures by one or more counterparties could negatively impact our cash flow from operating activities.

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

Due to the above factors, we are unable to forecast with certainty our future level of cash flow from operations. Accordingly, we will adjust our discretionary uses of cash dependent upon available cash flow.

Capital Investments

Our capital investments were $2.2 billion in 2011, up from $2.1 billion in 2010. Capital investments include an increase of $4.3 million in 2011, an increase of $14.4 million in 2010 and an increase of $12.2 million in 2009 related to the change in accrued expenditures between years. Our E&P segment investments in 2011 were $2.0 billion, compared to $1.8 billion in 2010 and $1.6 billion in 2009.

	2011	2010	2009
	(in thousands)
Exploration and production	$   1,977,493	$     1,775,518	$     1,565,450
Midstream services	160,776	271,316	214,208
Other	68,905	73,231	29,459
	$   2,207,174	$      2,120,065	$      1,809,117

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Our capital investments for 2012 are planned to be $2.1 billion, consisting of approximately $1.8 billion for E&P, $190 million for Midstream Services and $90 million for corporate and other purposes. Of the approximate $1.8 billion, we expect to allocate approximately $1.1 billion to our Fayetteville Shale play. Our planned level of capital investments in 2012 is expected to allow us to continue our progress in the Fayetteville Shale and Marcellus Shale programs and explore and develop other existing natural gas and oil properties and generate new drilling prospects. As discussed above, our 2012 capital investment program is expected to be funded through cash flow from operations and borrowings under our Credit Facility. The planned capital program for 2012 is flexible and can be modified, including downward, if the low natural gas price environment persists for an extended period of time.  We will reevaluate our proposed investments as needed to take into account prevailing market conditions and, if natural gas prices change significantly in 2012, we could change our planned investments.

Financing Requirements

Our total debt outstanding was $1,343.3 million at December 31, 2011, compared to $1,094.2 million at December 31, 2010.

In February 2011, we amended and restated our unsecured revolving credit facility, increasing the borrowing capacity to $1.5 billion and extending the maturity date to February 2016.  The amount available under the revolving credit facility may be increased to $2.0 billion at any time upon the Company’s agreement with its existing or additional lenders. We had $671.5 and $421.2 million outstanding under its revolving credit facility at December 31, 2011 and December 31, 2010, respectively.

The interest rate on our Credit Facility is calculated based upon our public debt rating and is currently 200 basis points over LIBOR. At February 23, 2012, our publicly traded notes are rated BBB- by Standard and Poor’s and we have a Corporate Family Rating of Baa3 by Moody’s. Any downgrades in our public debt ratings could increase our cost of funds under the Credit Facility.

Our Credit Facility contains covenants which impose certain restrictions on us. Under the Credit Facility, we must keep our total debt at or below 60% of our total capital, and must maintain a ratio of EBITDA to interest expense of 3.5 or above. Our Credit Facility’s financial covenants with respect to capitalization percentages exclude the noncontrolling interest in equity, the effects of non-cash entries that result from any full cost ceiling impairments, hedging activities and our pension and other postretirement liabilities. Therefore, under our Credit Facility, our capital structure at December 31, 2011 would have been 27% debt and 73% equity. We were in compliance with all of the covenants of our Credit Facility at December 31, 2011. Although we do not anticipate any violations of our financial covenants, our ability to comply with those covenants is dependent upon the success of our exploration and development program and upon factors beyond our control, such as the market prices for natural gas and oil.  If we are unable to borrow under our Credit Facility, we would have to decrease our capital investment plans.

At December 31, 2011, our capital structure consisted of 25% debt and 75% equity compared to 27% debt and 73% equity at December 31, 2010.  Our debt percentage of total capital at December 31, 2011 decreased in 2011, primarily due to our profitable results and the minimal funding of our capital investments and operational needs through debt.  Equity at December 31, 2011 included an accumulated other comprehensive gain of $424.9 million related to our hedging activities and a loss for $15.9 million related to our pension and other postretirement liabilities. The amount recorded in equity for our hedging activities is based on current market values for our hedges at December 31, 2011 and does not necessarily reflect the value that we will receive or pay when the hedges are ultimately settled, nor does it take into account revenues to be received associated with the physical delivery of sales volumes hedged.

Our hedges allow us to ensure a certain level of cash flow to fund our operations.  At February 23, 2012, we had NYMEX commodity price hedges in place on 266.4 Bcf, or approximately 47% of our targeted 2012 natural gas production and 185.2 Bcf of our expected 2013 natural gas production.  The amount of long-term debt we incur will be dependent upon commodity prices and our capital investment plans.

Off-Balance Sheet Arrangements

We may enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations.  At December 31, 2011, the Company’s material off-balance sheet arrangements and transactions include operating lease arrangements.  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 or capital resources.  

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For more information regarding off-balance sheet arrangements, we refer you to “Contractual Obligations and Contingent Liabilities and Commitments” below.  

Contractual Obligations and Contingent Liabilities and Commitments

We have various contractual obligations in the normal course of our operations and financing activities. Significant contractual obligations at December 31, 2011, were as follows:

Contractual Obligations:

	Payments Due by Period
		Less than			More than
	Total	1 Year	1 to 3 Years	3 to 5 Years	5 Years
	(in thousands)
Demand charges(1)	$    2,095,722	$       212,160	$       453,249	$       469,850	$       960,463
Debt	1,343,300	1,200	2,400	673,900	665,800
Interest on senior notes	386,590	64,304	130,105	117,588	74,593
Operating leases(2)	268,088	69,728	122,720	59,426	16,214
Operating agreements(3)	613,622	459,523	145,401	8,698	—
Compression services(4)	107,130	42,115	45,744	17,563	1,708
Purchase obligations(5)	50,221	50,221	—	—	—
Other obligations(6)	213,697	78,285	14,856	3,154	117,402
	$    5,078,370	$       977,536	$       914,475	$    1,350,179	$    1,836,180

(1)

As of December 31, 2011, our Midstream Services segment had commitments for demand transportation charges on various pipelines, including approximately $1.0 billion related to the FEP pipeline and $0.7 billion related to the Boardwalk Pipeline.

(2)

Operating leases include costs for compressors, aircraft, vehicles, office space and equipment under non-cancelable operating leases expiring through 2019. Additionally, this includes $58.1 million for leases of 14 drilling rigs and related equipment through 2014.

(3)

As of December 31, 2011, our E&P segment had commitments for approximately $548.3 million to companies for fracture stimulation services, which are cancellable under certain circumstances.     

(4)

As of December 31, 2011, our Midstream Services segment had commitments of approximately $100.6 million and our E&P segment had commitments of approximately $6.5 million for compression services associated primarily with our Fayetteville Shale play operations.

(5)

Purchase obligations consist of outstanding purchase orders under existing agreements.  As of December 31, 2011, our Midstream Services segment had outstanding purchase obligations of $12.7 million relating to compression units.

(6)

In conjunction with our exploration program in New Brunswick, Canada, we provided promissory notes payable on demand to the Minister of Finance of the Province of New Brunswick with an aggregate principal amount of CAD $44.5 million. See Note 8 to the consolidated financial statements for additional information regarding our commitments related to our exploration program in Canada. Our other significant contractual obligations include approximately $127.5 million for asset retirement obligations primarily relating to oil and gas properties, approximately $12.0 million for funding of benefit plans, approximately $9.6 million for various information technology support and data subscription agreements, approximately $7.1 million for insurance premium financing and approximately $7.4 million related to seismic services.  

We refer you to Note 7 to the consolidated financial statements for a discussion of the terms of our debt.

Commitments and Contingent Liabilities

Substantially all of our employees are covered by defined benefit and postretirement benefit plans. We currently expect to contribute approximately $12.7 million to our pension plans and $0.2 million to our postretirement benefit plan in 2012. For 2011, we contributed $12.5 million to our pension plans and contributed $0.1 million to our postretirement benefit plan. At December 31, 2011 we recognized a liability of $20.5 million as a result of the underfunded status of our pension and other postretirement benefit plans compared to a liability of $15.9 million at December 31, 2010. For further information regarding our pension and other postretirement benefit plans, we refer you to Note 11 to the consolidated financial statements and “Critical Accounting Policies” below for additional information.

Working Capital

We maintain access to funds that may be needed to meet capital requirements through our Credit Facility described in “Financing Requirements” above. We had positive working capital of $93.4 million at December 31, 2011 and negative working capital of $113.1 million at December 31, 2010. Current assets increased $397.4 million during 2011 primarily due to a $384.1 million increase in our current hedging asset which was partially offset by a $9.7 million decrease in  

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accounts receivable. Current liabilities increased $190.9 million primarily due to a $150.1 million increase in our current deferred income taxes related to our hedging activities, a $40.2 million increase in accounts payable, and a $2.4 million increase in advances from partners.  

Natural Gas in Underground Storage

We currently have one facility owned by our E&P segment that contains natural gas in underground storage. Natural gas in storage that is expected to be cycled within the next 12 months is recorded in current assets. This current portion of natural gas in storage is classified as inventory and is carried at the lower of cost or market.  At December 31, 2011 and 2010, the current portion of natural gas in storage was $7.8 million and $10.0 million, respectively. The non-current portion of natural gas in storage is classified in property and equipment and carried at cost.  The carrying value of the non-current gas is evaluated for recoverability whenever events or changes in circumstances indicate that it may not be recoverable.

The natural gas in inventory for the E&P segment is used primarily to supplement production in meeting the segment’s contractual commitments, especially during periods of colder weather. In determining the lower of cost or market for storage gas, we utilize the natural gas futures market in assessing the price we expect to be able to realize for our natural gas in inventory. A significant decline in the future market price of natural gas could require a write-down of our natural gas in underground storage carrying cost.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following describes significant judgments and estimates used in the preparation of our consolidated financial statements.

Natural Gas and Oil Properties

We utilize 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 and oil reserves discounted at 10 percent (standardized measure) plus the lower of cost or market value of unproved properties. 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 and oil prices may subsequently increase the ceiling. Effective December 31, 2009, companies using the full cost method were required to use the average quoted price from the first day of each month from the previous 12 months, including the impact of derivatives qualifying as cash flow hedges, to calculate the ceiling value of their reserves. For quarter and annual periods ending prior to December 31, 2009, prices in effect at the date of each accounting quarter, including the impact of derivatives qualifying as cash flow hedges, were required to be used.

Using the average quoted price from the first day of each month from the previous 12 months for Henry Hub natural gas of $4.12 per MMBtu and $92.71 per barrel for West Texas Intermediate oil, adjusted for market differentials, the Company’s net book value of its United States natural gas and oil properties did not exceed the ceiling amount and did not result in a ceiling test impairment at December 31, 2011. Cash flow hedges of natural gas production in place increased this ceiling amount by approximately $262.5 million at December 31, 2011. Decreases in average market prices as well as changes in production rates, levels of reserves, evaluation of costs excluded from amortization, future development costs and service costs could result in future ceiling test impairments.  Using the first-day-of-the-month prices of natural gas for the first two months of 2012 and NYMEX strip prices for the remainder of 2012, as applicable, the prices required to be used to determine the ceiling limit could result in a ceiling test write-down in the first quarter of 2012 and are likely to require ceiling test write-downs in each of the remaining quarters in 2012.  At December 31, 2010, the ceiling value of the Company’s reserves was calculated based upon year-end quoted market prices of $4.38 per MMBtu for Henry Hub natural gas and $75.96 per barrel for West Texas Intermediate oil, and at December 31, 2009, the ceiling value of the Company’s

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reserves was calculated based upon year-end quoted market prices of $3.87 per MMBtu for Henry Hub natural gas and $57.65 per barrel for West Texas Intermediate oil. 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. At March 31, 2009, the net capitalized costs of our natural gas and oil properties exceeded the ceiling by approximately $558.3 million (net of tax) and resulted in a non-cash ceiling test impairment using quarter-end market prices of $3.63 per MMBtu for Henry Hub natural gas and $46.00 per barrel for West Texas Intermediate oil.

All of our costs directly associated with the acquisition and evaluation of properties in New Brunswick, Canada relating to our exploration program at December 31, 2011 were unproved and did not exceed the ceiling amount.  If our exploration program in Canada is unsuccessful on all or a portion of these properties, a ceiling test impairment may result in the future.

Natural gas and oil reserves cannot be measured exactly.  Our estimate of natural gas and oil reserves requires extensive judgments of reservoir engineering data and projections of cost that will be incurred in developing and producing reserves and is generally less precise than other estimates made in connection with financial disclosures. Our reservoir engineers prepare our reserve estimates under the supervision of our management.  Reserve estimates are prepared for each of our properties annually by the reservoir engineers assigned to the asset management team to which the property is assigned.  The reservoir engineering and financial data included in these estimates are reviewed by senior engineers who are not part of the asset management teams and our Manager – Capital Budgeting & Reserves, who was the technical person primarily responsible for the preparation of our reserve estimates, and has over eight years of experience in petroleum engineering, including the estimation of oil and natural gas reserves, who reports to our Senior Vice President – Corporate Development.  Our Senior Vice President – Corporate Development has more than 30 years of experience in reservoir engineering, including the estimation of oil and gas reserves in multiple basins both in the United States and internationally.  On our behalf, the Senior Vice President – Corporate Development engages NSAI, a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies, to independently audit our proved reserves estimates as discussed in more detail below. The financial data included in the reserve estimates are also separately reviewed by our accounting staff. Following these reviews and the audit, the reserve estimates are submitted by our Senior Vice President – Corporate Development to our Chief Executive Officer for his review and approval prior to the presentation to our Board of Directors.  NSAI reports the results of its reserve audit to the Board of Directors and final authority over the estimates of our proved reserves rests with our Board of Directors.  

In each of the past three years, revisions to our proved reserve estimates represented no greater than 7% of our total proved reserve estimates, which we believe is indicative of the effectiveness of our internal controls. Proved developed reserves generally have a higher degree of accuracy in this estimation process, when compared to proved undeveloped and proved non-producing reserves, as production history and pressure data over time is available for the majority of our proved developed properties. Proved developed reserves accounted for 55% of our total reserve base at December 31, 2011. Assigning monetary values to such estimates does not reduce the subjectivity and changing nature of such reserve estimates. The uncertainties inherent in the reserve estimates are compounded by applying additional estimates of the rates and timing of production and the costs that will be incurred in developing and producing the reserves.  We cannot assure you that our internal controls sufficiently address the numerous uncertainties and risks that are inherent in estimating quantities of natural gas and oil reserves and projecting future rates of production and timing of development expenditures as many factors are beyond our control.  We refer you to “Although our estimated natural gas and oil reserve data is independently audited, our estimates may still prove to be inaccurate” in Item 1A, “Risk Factors,” of Part I of this Form 10-K for a more detailed discussion of these uncertainties, risks and other factors.

In conducting its audit, the engineers and geologists of NSAI study our major properties in detail and independently develop reserve estimates.  NSAI’s audit consists primarily of substantive testing, which includes a detailed review of major properties that account for approximately 90% of present worth of the company’s total proved reserves.  NSAI’s audit process consists of sorting all fields by descending present value order and selecting the fields from highest value to descending value until the selected fields account for more than 80% of the present worth of our reserves.  The properties in the bottom 20% of the total present worth are not reviewed in the audit.  The fields included in approximately the top 90% present value as of December 31, 2011, accounted for approximately 92% of our total proved reserves and approximately 98% of our proved undeveloped reserves.  In the conduct of its audit, NSAI did not independently verify the data we provided to them with respect to ownership interests, oil and natural gas production, well test data, historical costs of operation and development, product prices, or any agreements relating to current and future operations of the properties and sales of production.  NSAI has advised us that if, in the course of its audit, something came to its attention that brought into question the validity or sufficiency of any such information or data, NSAI did not rely on such information or data until it had satisfactorily resolved any questions relating thereto or had independently verified such information or data. For the year-ended December 31, 2011, on January 30, 2012, NSAI issued its audit opinion as to the reasonableness of our reserve estimates, stating that our estimated proved oil and gas reserves are, in the aggregate, reasonable and have been

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prepared in accordance with Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers.

A decline in natural gas and oil prices used to calculate the discounted future net revenues of our reserves affects both the present value of cash flows and the quantity of reserves reported. Our reserve base is nearly 100% natural gas, therefore changes in oil prices used do not have as significant an impact as natural gas prices on cash flows and reported reserve quantities. Our standardized measure and reserve quantities at December 31, 2011, were $3,450.8 million and 5,893.2 Bcfe, respectively. An assumed decrease of $1.00 per Mcf in the average 2011 natural gas price used to price our reserves would have resulted in an approximate $1,472.6 million decline in our standardized measure and an approximate decrease of 947 Bcfe of our reported reserves. The decline in reserve quantities, assuming this decrease in natural gas price, would have the impact of increasing our unit of production amortization of the full cost pool. The unit of production rate for amortization is adjusted quarterly based on changes in reserve estimates, capitalized costs and future development costs.

Hedging

We use natural gas and crude oil swap agreements and options to reduce the volatility of earnings and cash flow due to fluctuations in the prices of natural gas and oil. Our policies prohibit speculation with derivatives and limit agreements to counterparties with appropriate credit standings to minimize the risk of uncollectability. 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. From 2006 through 2008, we established a portfolio of hedges relating to approximately 60% to 80% of our annual production.  However, only 45%, 30% and 52% of our 2009, 2010, and 2011 production, respectively, was hedged due to credit and overall market events of 2008 and 2009 as well as the low commodity price environment throughout 2010 and 2011. The primary market risks related to our derivative contracts are the volatility in market prices and basis differentials for natural gas and crude oil. However, the market price risk is generally offset by the gain or loss recognized upon the related natural gas or oil transaction that is hedged.

Our derivative instruments are recorded at fair value in our financial statements and generally qualify for hedge accounting. We have established the fair value of derivative instruments using data provided by our counterparties in conjunction with assumptions evaluated internally using established index prices and other sources. These valuations are recognized as assets or liabilities in our balance sheet and, to the extent an open position is an effective cash flow hedge on equity production, the offset is recorded in other comprehensive income. Results of settled commodity hedging transactions are reflected in natural gas and oil sales. Any derivative not qualifying for hedge accounting treatment or any ineffective portion of a properly designated hedge is recognized immediately in earnings. For the year ended December 31, 2011, we recorded an unrealized gain of $5.2 million related to basis differential swaps that did not qualify for hedge accounting in addition to a $4.2 million loss related to the change in estimated ineffectiveness of our commodity cash flow hedges. Future market price volatility could create significant changes to the hedge positions recorded in our financial statements. We refer you to “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II of this Form 10-K for additional information regarding our hedging activities.

Pension and Other Postretirement Benefits

We record our prepaid or accrued benefit cost, as well as our periodic benefit cost, for our pension and other postretirement benefit plans using measurement assumptions that we consider reasonable at the time of calculation (see Note 11 to the consolidated financial statements for further discussion and disclosures regarding these benefit plans). Two of the assumptions that affect the amounts recorded are the discount rate, which estimates the rate at which benefits could be effectively settled, and the expected return on plan assets, which reflects the average rate of earnings expected on the funds invested. For the December 31, 2011 benefit obligation and the periodic benefit cost to be recorded in 2012, the discount rate assumed is 5.00%. For the 2012 periodic benefit cost, the expected return assumed is 7.50%. This compares to a discount rate of 5.50% and an expected return of 7.50% used in 2011.  

Using the assumed rates discussed above, we recorded total benefit cost of $11.5 million in 2011 related to our pension and other postretirement benefit plans.  Due to the significance of the discount rate and expected long-term rate of return, the following sensitivity analysis demonstrates the effect that a 50 basis point change in those assumptions would have had on our 2011 pension expense:

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	Increase (Decrease) of Annual Pension Expense
	50 Basis Point Increase	50 Basis Point Decrease
	(in thousands)
Discount rate	$                (623)	$                 682
Expected long-term rate of return	$                (293)	$                 293

At December 31, 2011, we recognized a liability of $20.5 million, compared to $15.9 million at December 31, 2010, related to our pension and other postretirement benefit plans. During 2011, we also made cash payments totaling $12.6 million to fund our pension and other postretirement benefit plans. In 2012, we expect to make cash payments totaling $12.9 million to fund our pension and other postretirement benefit plans and recognize pension expense of $12.0 million and a postretirement benefit expense of $2.2 million.

New Accounting Standards Implemented in this Report

In January 2011, we implemented certain provisions of Accounting Standards Update No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements” (“Update 2010-06”).  Update 2010-06 requires entities to provide a reconciliation of purchases, sales, issuance and settlements of anything valued with a Level 3 method, which is used to price the hardest to value instruments. The implementation did not have an impact on our results of operations, financial position or cash flows. 

In July 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (“Update 2011-05”), which amends Topic 200, Comprehensive Income. Update 2011-05 eliminates the option to present components of ‘other comprehensive income’ (“OCI”) in the statement of changes in stockholders’ equity, and requires presentation of total comprehensive income and components of net income in a single statement of comprehensive income, or in two separate, consecutive statements. Update 2011-05 requires presentation of reclassification adjustments for items transferred from OCI to net income on the face of the financial statements where the components of net income and the components of OCI are presented. The amendments do not change current treatment of items in OCI, transfer of items from OCI, or reporting items in OCI net of the related tax impact. Update 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011.  The implementation of these changes did not have an impact on the Company’s results of operations, financial position or cash flows.

Accounting Standards Not Yet Implemented

In May 2011, the FASB issued guidance on fair value measurement and disclosure requirements outlined in Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820)–Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“Update 2011-04”).  Update 2011-04 expands existing fair value disclosure requirements, particularly for Level 3 inputs, including: quantitative disclosure of the unobservable inputs and assumptions used in the measurement; description of the valuation processes in place and sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs; the level of items (in the fair value hierarchy) that are not measured at fair value in the balance sheet but whose fair value must be disclosed; and the use of a nonfinancial asset if it differs from the highest and best use assumed in the fair value measurement. The amendments in Update 2011-04 must be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011. The implementation of the disclosure requirement is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued guidance on offsetting assets and liabilities and disclosure requirements in Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“Update 2011-11”).  Update 2011-11 requires that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transaction s subject to an agreement similar to a master netting agreement.  In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements.  Update 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.  The implementation of the disclosure requirement is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued guidance on accumulated other comprehensive income in Accounting Standards Update No. 2011-12,Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards

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Update No. 2011-05 (“Update 2011-12”).  Update 2011-12 defers the specific requirement to present items that are classified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income, as promulgated under Update 2011-05.  Update 2011-12 is effective for annual reporting periods beginning on or after December 15, 2011, and interim periods within those annual periods.  The Company is currently evaluating the impact that the implementation of the disclosure requirement is expected to have on the Company’s consolidated results of operations, financial position or cash flows.    

See further discussion of our significant accounting policies in Note 1 to the consolidated financial statements.

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

Forward-looking statements include the items identified in the preceding paragraph, information concerning possible or assumed future results of operations and other statements in this Form 10-K identified by words such as “anticipate,” “project,” “intend,” “estimate,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “plan,” “forecast,” “target” or similar expressions.

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 and oil (including regional basis differentials);

·

our ability to fund our planned capital investments;

·

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

·

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

·

the economic viability of, and our success in drilling, our large acreage position in the Fayetteville Shale play overall as well as relative to other productive shale gas plays;

·

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

·

the costs and availability of oilfield personnel, services and drilling supplies, raw materials, and equipment, including pressure pumping equipment and crews;

·

our ability to determine the most effective and economic fracture stimulation for the Fayetteville Shale play and Marcellus Shale play;

·

our future property acquisition or divestiture activities;

·

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

·

the effects of weather;

·

increased competition and regulation;

·

the financial impact of accounting regulations and critical accounting policies;

·

the comparative cost of alternative fuels;

·

conditions in capital markets, changes in interest rates and the ability of our lenders to provide us with funds as agreed;

·

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”).

We caution you that forward-looking statements contained in this Form 10-K are subject to all of the risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production and sale of natural gas and oil. These risks include, but are not limited to, commodity price volatility, third-party interruption of

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sales to market, inflation, lack of availability of goods and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating proved natural gas and oil reserves and in projecting future rates of production and timing of development expenditures and the other risks described in Item 1A of Part I of this Form 10-K.

Estimates of our proved natural gas and oil reserves and the estimated future net revenues from such reserves in this Form 10-K are based upon various assumptions, including assumptions required by the SEC relating to natural gas and oil prices, drilling and operating expenses, capital investments, taxes and availability of funds. The process of estimating natural gas and oil reserves is complex. This process requires significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Therefore, those estimates are inherently imprecise.

Actual future production, natural gas and oil prices, revenues, taxes, development costs, operating expenses and quantities of recoverable natural gas and oil reserves will most likely vary from those estimated. Such variances may be material. Any significant variance could materially affect the estimated quantities and present value of reserves set forth in this Form 10-K. Our properties may also be susceptible to hydrocarbon drainage from production by other operators on adjacent properties. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing natural gas and oil prices and other factors, many of which are beyond our control.

At December 31, 2011, approximately 45% of our estimated proved reserves were proved undeveloped and 1% were proved developed non-producing. Proved undeveloped reserves and proved developed non-producing reserves, by their nature, are less certain than proved developed producing reserves. Estimates of reserves in the non-producing categories are nearly always based on volumetric calculations rather than the performance data used to estimate producing reserves. Recovery of proved undeveloped reserves requires significant capital expenditures and successful drilling operations. Recovery of proved developed non-producing reserves requires capital expenditures to recomplete into the zones behind pipe and is subject to the risk of a successful recompletion. Production revenues from proved undeveloped and proved developed non-producing reserves will not be realized, if at all, until sometime in the future.

The reserve data assumes that we will make significant capital investments to develop our reserves. Although we have prepared estimates of our natural gas and oil reserves and the costs associated with these reserves in accordance with industry standards, we cannot assure you that the estimated costs are accurate, that development will occur as scheduled or that the actual results will be as estimated.

You should not assume that the present value of future net cash flows referred to in this Form 10-K is the current fair value of our estimated natural gas and oil reserves. In accordance with SEC requirements, the estimated discounted future net cash flows from proved reserves are generally based on average prices over the preceding twelve months and costs as of the date of the estimate. Actual future prices and costs may be materially higher or lower than the average prices and costs as of the date of the estimate. Any changes in consumption by gas purchasers or in governmental regulations or taxation could also affect actual future net cash flows. The timing of both the production and the expenses from the development and production of natural gas and oil properties will affect the timing of actual future net cash flows from proved reserves and their present value. In addition, the 10% discount factor, which is required by the SEC to be used in calculating discounted future net cash flows for reporting purposes, is not necessarily the most accurate discount factor for our company.

Should one or more of the risks or uncertainties described above or elsewhere in this Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We specifically disclaim all responsibility to publicly update any information contained in a forward-looking statement or any forward-looking statement in its entirety and therefore disclaim any resulting liability for potentially related damages.

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

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ITEM 7A. 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 credit risk concentrations. We use natural gas and crude oil swap agreements and options and interest rate swaps to reduce the volatility of earnings and cash flow due to fluctuations in the prices of natural gas and oil and in 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 subject to the approval of our Board of Directors. These policies prohibit speculation with derivatives and limit swap agreements to counterparties with appropriate credit standings.

Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of trade receivables and derivative contracts associated with commodities trading. Concentrations of credit risk with respect to receivables are limited due to the large number of our customers and their dispersion across geographic areas. No single customer accounted for greater than 10% of revenues at December 31, 2011.  See “Commodities Risk” below for discussion of credit risk associated with commodities trading.

Interest Rate Risk

The following table presents the principal cash payments for our debt obligations and related weighted-average interest rates by expected maturity dates as of December 31, 2011. At December 31, 2011, we had $1,343.3 million of total debt with a weighted average interest rate of 4.87% and we had $671.5 million of indebtedness outstanding under our Credit Facility. Interest rate swaps may be used to adjust interest rate exposures when deemed appropriate. We do not have any interest rate swaps in effect currently.

								Fair
	Expected Maturity Date							Value
	2012	2013	2014	2015	2016	Thereafter	Total	12/31/11
	($ in millions)
Fixed Rate	$          1.2	$          1.2	$          1.2	$          1.2	$          1.2	$      665.8	$      671.8	$      773.6
Average Interest Rate	7.15%	7.15%	7.15%	7.15%	7.15%	7.47%	7.47%	—
Variable Rate	—	—	—	—	$     671.5	—	$      671.5	$      671.5
Average Interest Rate	—	—	—	—	2.28%	—	2.28%	—

Commodities Risk

We use over-the-counter natural gas and crude oil swap agreements and options to hedge sales of our production and to hedge activity in our Midstream Services segment against the inherent price risks of adverse price fluctuations or locational pricing differences between a published index and the NYMEX futures market. These swaps and options include (1) 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), (2) transactions in which parties agree to pay a price based on two different indices (referred to as basis swaps) and (3) the purchase and sale of index-related puts and calls (collars) that provide a “floor” price, below which the counterparty pays funds equal to the amount by which the price of the commodity is below the contracted floor, and a “ceiling” price above which we pay to the counterparty the amount by which the price of the commodity is above the contracted ceiling.

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

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Exploration and Production

The following table provides information about our financial instruments that are sensitive to changes in commodity prices and that are used to hedge prices for natural gas production. The table presents the notional amount in Bcf, the weighted average contract prices and the fair value by expected maturity dates. At December 31, 2011, the fair value of our financial instruments related to natural gas production and gas-in-storage was a $704.8 million asset.

		Weighted	Weighted	Weighted	Weighted
		Average	Average	Average	Average	Fair value at
		Price to be	Floor	Ceiling	Basis	December 31,
	Volume	Swapped	Price	Price	Differential	2011
	(Bcf)	($/MMBtu)	($/MMBtu)	($/MMBtu)	($/MMBtu)	($ in millions)
Natural Gas:
Fixed Price Swaps:
2012	185.9	$      5.02	$ —	$ —	$ —	$     322.8
2013	185.2	$      5.06	$ —	$ —	$ —	$     201.1
Floating Price Swaps:
2012	5.7	$      5.21	$ —	$ —	$ —	$    (1.2)
Costless-Collars:
2012	80.5	$ —	$      5.50	$           6.67	$ —	$     178.9
Basis Swaps:
2012	36.6	$ —	$ —	$ —	$       0.09	$    1.5
2013	30.1	$ —	$ —	$ —	$      0.07	$    1.1
2014	9.1	$ —	$ —	$ —	$      (0.03)	$    0.6

At December 31, 2011, our basis swaps did not qualify for hedge accounting treatment. Changes in the fair value of derivatives that do not qualify as cash flow hedges are recorded in natural gas and oil sales. For the year ended December 31, 2011, we recorded an unrealized gain of $5.2 million related to the basis swaps that did not qualify for hedge accounting treatment and an unrealized loss of $4.2 million related to the change in estimated ineffectiveness of our cash flow hedges. Typically, our hedge ineffectiveness results from changes at the end of a reporting period in the price differentials between the index price of the derivative contract, which is primarily a NYMEX price, and the index price for the point of sale for the cash flow that is being hedged.

Additionally, at December 31, 2010, we had outstanding fixed price basis differential swaps on 12.0 Bcf of 2011 natural gas production that did not qualify for hedge treatment.

Midstream Services

At December 31, 2011, our Midstream Services segment had outstanding fair value hedges in place on 0.1 Bcf of natural gas for 2012. These hedges are a mixture of floating-price swap purchases and sales relating to our natural gas marketing activities. These hedges have contract months from January 2012 to March 2012 and have a net fair value liability of less than $0.1 million as of December 31, 2011.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Management’s Report on Internal Control Over Financial Reporting	68
Report of Independent Registered Public Accounting Firm	69
Consolidated Statements of Operations for the years ended December 31, 2011, 2010 and 2009	70
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2011,        2010 and 2009	71
Consolidated Balance Sheets as of December 31, 2011 and 2010	72
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009	73
Consolidated Statements of Equity for the fiscal years ended December 31, 2011, 2010 and 2009	74
Notes to Consolidated Financial Statements, December 31, 2011, 2010 and 2009	75

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Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financialreporting as defined in Rule 13a-15(f) under the Exchange Act.  We have performed an evaluation under thesupervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness ofour internal control over financial reporting.  Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Our management used the criteria set forth in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to perform its assessment. Based on this assessment, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded, that as of December 31, 2011, our internal control over financial reporting was effective based on those criteria.  

The effectiveness of our internal control over financial reporting as of December 31, 2011 has been audited by PricewaterhouseCoopers LLP, an independent registered publicaccounting firm, as stated in their report that follows.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Southwestern Energy Company:

In our opinion, the accompanying consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Southwestern Energy Company and its subsidiaries at December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it estimates the quantities of oil and natural gas reserves in 2009 and the limitation on its capitalized costs as of December 31, 2009.  

A company’s internal control over financial reporting is a process designed 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.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Houston, Texas

February 27, 2012

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the years ended December 31,
	2011	2010	2009
	(in thousands, except share/per share amounts)
Operating Revenues:
Gas sales	$   2,080,241	$     1,856,241	$     1,578,256
Gas marketing	714,123	615,913	488,663
Oil sales	9,085	13,111	6,843
Gas gathering	149,973	122,912	74,281
Other	(516)	2,486	(2,264)
	2,952,906	2,610,663	2,145,779
Operating Costs and Expenses:
Gas purchases – midstream services	709,091	611,161	482,836
Operating expenses	240,944	191,771	136,541
General and administrative expenses	158,041	145,563	122,618
Depreciation, depletion and amortization	704,511	590,332	493,658
Impairment of natural gas and oil properties	—	—	907,812
Taxes, other than income taxes	65,518	50,608	37,280
	1,878,105	1,589,435	2,180,745
Operating Income (Loss)	1,074,801	1,021,228	(34,966)
Interest Expense:
Interest on debt	65,421	57,144	55,581
Other interest charges	4,306	1,935	3,266
Interest capitalized	(45,652)	(32,916)	(40,209)
	24,075	26,163	18,638
Other Income, Net	264	427	1,449
Income (Loss) Before Income Taxes	1,050,990	995,492	(52,155)
Provision (Benefit) for Income Taxes:
Current	4,198	11,939	(64,969)
Deferred	409,023	379,720	48,606
	413,221	391,659	(16,363)
Net Income (Loss)	637,769	603,833	(35,792)
Less: Net Loss Attributable to Noncontrolling Interest	—	(285)	(142)
Net Income (Loss) Attributable to Southwestern Energy	$      637,769	$        604,118	$         (35,650)
Earnings Per Share:
Net income (loss) attributable to Southwestern Energy stockholders-Basic	$             1.84	$              1.75	$             (0.10)
Net income (loss) attributable to Southwestern Energy stockholders-Diluted	$             1.82	$              1.73	$             (0.10)
Weighted Average Common Shares Outstanding:
Basic	347,205,316	345,581,568	343,420,568
Effect of:
Stock options	2,475,053	3,512,241	—
Restricted stock awards	241,044	216,857	—
Diluted	349,921,413	349,310,666	343,420,568

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

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STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	For the years ended December 31,
	2011	2010	2009
	(in thousands)
Net income (loss)	$      637,769	$         603,833	$         (35,792)
Change in derivatives:
Reclassification to earnings (1)	(194,693)	(182,619)	(376,259)
Ineffectiveness (2)	2,518	4,145	(6,031)
Change in fair value of derivative instruments (3)	520,552	179,649	218,699
Total change in derivatives	328,377	1,175	(163,591)
Change in value of pension and other postretirement liabilities:
Current period net loss (4)	(4,129)	(2,148)	(477)
Current period prior service cost (5)	—	16	(57)
Less: amortization of prior service cost included in net periodic pension cost (6)	766	674	736
Total change in value of pension and other postretirement liabilities	(3,363)	(1,458)	202
Change in currency translation adjustment	(561)	(18)	—
Comprehensive income (loss)	962,222	603,532	(199,181)
Less: comprehensive loss attributable to the noncontrolling interest	—	(285)	(142)
Comprehensive income (loss) attributable to Southwestern Energy	$      962,222	$         603,817	$       (199,039)

(1) Net of ($126.6), ($118.9), and ($234.1) million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

(2) Net of $1.6, $2.6, and ($3.8) million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

(3) Net of $338.4, $119.5, and $137.7 million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

(4) Net of ($2.7), ($2.0) and ($0.2) million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

(5) Net of less than $0.1 and ($0.1) million in taxes for the years ended December 31, 2010 and 2009, respectively.

(6) Net of $0.5, $0.6, and $0.5 million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

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

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CONSOLIDATED BALANCE SHEETS

	December 31,
	2011	2010
ASSETS	(in thousands)
Current Assets:
Cash and cash equivalents	$           15,627	$            16,055
Accounts receivable	341,915	351,573
Inventories	46,234	35,098
Hedging asset	514,465	130,412
Other	60,037	47,755
Total current assets	978,278	580,893
Property and Equipment:
Natural gas and oil properties, using the full cost method, including $942.9 million in 2011 and $712.1 million in 2010 excluded from amortization	9,544,708	7,749,863
Gathering systems	980,647	817,465
Other	535,464	413,557
Total property and equipment	11,060,819	8,980,885
Less: Accumulated depreciation, depletion and amortization	4,415,339	3,682,688
	6,645,480	5,298,197
Other Assets	279,139	138,373
TOTAL ASSETS	$      7,902,897	$       6,017,463
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$              1,200	$              1,200
Accounts payable	514,071	473,890
Taxes payable	40,691	50,051
Interest payable	20,565	19,954
Advances from partners	84,082	81,705
Hedging liability	12,458	7,685
Current deferred income taxes	194,163	44,089
Other	17,683	15,409
Total current liabilities	884,913	693,983
Long-Term Debt	1,342,100	1,093,000
Other Liabilities:
Deferred income taxes	1,586,798	1,130,292
Long-term hedging liability	55	40,188
Pension and other postretirement liabilities	20,338	15,777
Other long-term liabilities	99,389	79,347
	1,706,580	1,265,604
Commitments and Contingencies
Equity:
Southwestern Energy stockholders’ equity:
Common stock, $0.01 par value; authorized 1,250,000,000 shares in 2011 and 2010; issued 349,058,501 shares in 2011 and 347,733,839 in 2010	3,491	3,477
Additional paid-in capital	903,399	862,423
Retained earnings	2,656,214	2,018,445
Accumulated other comprehensive income	408,428	83,975
Common stock in treasury, 98,889 shares in 2011 and 156,636 in 2010	(2,228)	(3,444)
Total Equity	3,969,304	2,964,876
TOTAL LIABILITIES AND EQUITY	$      7,902,897	$       6,017,463

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

	For the years ended December 31,
	2011	2010	2009
	(in thousands)
Cash Flows From Operating Activities
Net income (loss)	$     637,769	$        603,833	$         (35,792)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	707,966	591,943	495,291
Impairment of natural gas and oil properties	—	—	907,812
Deferred income taxes	409,023	379,720	48,606
Unrealized (gain) loss on derivatives	(281)	(4,289)	5,309
Stock-based compensation expense	10,550	9,820	10,177
Other	991	(1,348)	9,625
Change in assets and liabilities:
Accounts receivable	9,659	(88,488)	(8,519)
Inventories	(12,975)	5,099	11,779
Accounts payable	11,490	65,782	(21,739)
Taxes payable	(9,360)	24,551	(6,451)
Interest payable	610	179	(1,082)
Advances from partners	2,377	29,299	(18,197)
Tax benefit for stock-based compensation	(14,626)	—	—
Other assets and liabilities	(13,376)	26,484	(37,443)
Net cash provided by operating activities	1,739,817	1,642,585	1,359,376
Cash Flows From Investing Activities
Capital investments	(2,184,474)	(2,073,174)	(1,780,165)
Proceeds from sale of property and equipment	154,526	350,227	818
Transfers to restricted cash	(85,055)	(356,035)	—
Transfers from restricted cash	85,055	356,035	—
Other	5,158	(2,684)	(1,257)
Net cash used in investing activities	(2,024,790)	(1,725,631)	(1,780,604)
Cash Flows From Financing Activities
Payments on current portion of long-term debt	(1,200)	(1,200)	(61,200)
Payments on revolving long-term debt	(3,445,900)	(2,958,100)	(1,371,700)
Borrowings under revolving long-term debt	3,696,200	3,054,800	1,696,200
Change in bank drafts outstanding	24,637	(11,545)	(30,920)
Revolving credit facility costs	(10,211)	—	—
Proceeds from exercise of common stock options	6,412	3,897	5,755
Tax benefit for stock-based compensation	14,626	—	—
Other	(261)	(1,612)	—
Net cash provided by financing activities	284,303	86,240	238,135
Effect of exchange rate changes on cash	242	(323)	—
Increase (decrease) in cash and cash equivalents	(428)	2,871	(183,093)
Cash and cash equivalents at beginning of year	16,055	13,184	196,277
Cash and cash equivalents at end of year	$        15,627	$          16,055	$          13,184

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

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STATEMENTS OF EQUITY

	Southwestern Energy Stockholders
					Accumulated
	Common Stock		Additional		Other	Common
	Shares		Paid-In	Retained	Comprehensive	Stock in	Noncontrolling
	Issued	Amount	Capital	Earnings	Income	Treasury	Interest	Total
	(in thousands)
Balance at December 31, 2008	343,625	$     3,436	$ 811,492	$1,449,977	$       247,665	$   (4,740)	$        10,133	$   2,517,963
Comprehensive loss:
Net Loss	—	—	—	(35,650)	—	—	(142)	(35,792)
Other comprehensive loss	—	—	—	—	(163,389)	—	—	(163,389)
Total comprehensive loss							(142)	(199,181)
Stock-based compensation	—	—	16,003	—	—	—	—	16,003
Exercise of stock options	2,153	22	5,733	—	—	—	—	5,755
Issuance of restricted stock	312	3	(3)	—	—	—	—	—
Cancellation of restricted stock	(10)	—	—	—	—	—	—	—
Issuance of stock awards	1	—	65	—	—	—	—	65
Treasury stock – non-qualified plan	—	—	204	—	—	407	—	611
Distributions to noncontrolling interest in partnership	—	—	—	—	—	—	(235)	(235)
Balance at December 31, 2009	346,081	$     3,461	$ 833,494	$1,414,327	$         84,276	$   (4,333)	$          9,756	$   2,340,981
Comprehensive income (loss):
Net Income (loss)	—	—	—	604,118	—	—	(285)	603,833
Other comprehensive loss	—	—	—	—	(301)	—	—	(301)
Total comprehensive income (loss)							(285)	603,532
Stock-based compensation	—	—	16,569	—	—	—	—	16,569
Exercise of stock options	1,293	12	3,885	—	—	—	—	3,897
Issuance of restricted stock	392	4	(4)	—	—	—	—	—
Cancellation of restricted stock	(30)	—	—	—	—	—	—	—
Tax withholding – stock compensation	(3)	—	(112)	—	—	—	—	(112)
Issuance of stock awards	1	—	37	—	—	—	—	37
Treasury stock – non-qualified plan	—	—	771	—	—	889	—	1,660
Distributions to noncontrolling interest in partnership	—	—	—	—	—	—	(188)	(188)
Purchase of noncontrolling interest in partnership	—	—	7,783	—	—	—	(9,283)	(1,500)
Balance at December 31, 2010	347,734	$     3,477	$ 862,423	$2,018,445	$         83,975	$   (3,444)	—	$   2,964,876
Comprehensive income:
Net Income	—	—	—	637,769	—	—	—	637,769
Other comprehensive income	—	—	—	—	324,453	—	—	324,453
Total comprehensive income							—	962,222
Tax benefit for stock-based compensation	—	—	14,626	—	—	—	—	14,626
Stock-based compensation	—	—	19,036	—	—	—	—	19,036
Exercise of stock options	851	9	6,403	—	—	—	—	6,412
Issuance of restricted stock	532	5	(5)	—	—	—	—	—
Cancellation of restricted stock	(52)	—	1	—	—	—	—	1
Tax withholding – stock compensation	(7)	—	(262)	—	—	—	—	(262)
Issuance of stock awards	1	—	42	—	—	—	—	42
Treasury stock – non-qualified plan	—	—	1,135	—	—	1,216	—	2,351
Balance at December 31, 2011	349,059	$     3,491	$ 903,399	$ 2,656,214	$       408,428	$   (2,228)	—	$   3,969,304

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Southwestern Energy Company (including its subsidiaries, collectively, “Southwestern” or the “Company”) is an independent energy company engaged in natural gas and oil exploration, development and production. The Company engages in natural gas and oil exploration and production, natural gas gathering and natural gas marketing through its subsidiaries. Southwestern’s exploration, development and production (“E&P”) activities are principally focused within the United States on development of an unconventional gas reservoir located on the Arkansas side of the Arkoma Basin, which the Company refers to as the Fayetteville Shale play.  The Company is also actively engaged in exploration and production activities in Pennsylvania, where we are targeting the unconventional gas reservoir known as the Marcellus Shale, and to a lesser extent in Texas and in Arkansas and Oklahoma in the Arkoma Basin.  The Company has recently commenced exploration operations in southern Arkansas and northern Louisiana testing a new unconventional horizontal oil play targeting the Lower Smackover Brown Dense formation.  Southwestern’s natural gas gathering and marketing (Midstream Services) activities primarily support the Company’s E&P activities in Arkansas, Pennsylvania and Texas.

Basis of Presentation

The consolidated financial statements included in this Annual Report on Form 10-K present the Company’s financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The Company evaluates subsequent events through the date the financial statements are issued.

Principles of Consolidation

The consolidated financial statements include the accounts of Southwestern and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated. In 2010, the Company purchased the non-controlling interest in Overton Partners, L.P.  

Revenue Recognition

Gas and oil sales. Gas sales and oil sales are recognized when the products are sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is reasonably assured. The Company uses the entitlement method that requires revenue recognition for the Company’s net revenue interest of sales from its properties.  Accordingly, gas sales and oil sales are not recognized for deliveries in excess of the Company’s net revenue interest, while gas sales and oil sales are recognized for any under delivered volumes. Production imbalances are generally recorded at estimated sales prices of the anticipated future settlements of the imbalances. At December 31, 2011, the Company had overproduction of 6.1 Bcf valued at $22.5 million and underproduction of 6.4 Bcf valued at $22.9 million. At December 31, 2010, the Company had overproduction of 3.9 Bcf valued at $13.3 million and underproduction of 3.7 Bcf valued at $12.8 million.

Gas marketing. The Company generally markets its natural gas, as well as some gas produced by third parties, to brokers, local distribution companies and end-users, pursuant to a variety of contracts. Gas marketing revenues are recognized when delivery of natural gas has occurred, title has transferred, the price is fixed or determinable and collectability of the revenue is reasonably assured.

Gas gathering. The Company gathers its natural gas, as well as some gas produced by third parties, pursuant to a variety of contracts. Gas gathering revenues are recognized when the service is performed, the price is fixed or determinable and collectability of the revenue is reasonably assured.

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Other. The Company maintains an underground gas storage facility and generally sells natural gas from its storage facility during the winter gas withdrawal season. Revenue is recognized on natural gas storage sales when the natural gas is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is reasonably assured. Other revenues include gains of $0.9 million, $2.5 million and $3.4 million in 2011, 2010 and 2009, respectively, primarily related to the sale of gas in underground storage.

Cash and Cash Equivalents

Cash and cash equivalents are defined by the Company as short-term, highly liquid investments that have an original maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash.  Management considers cash and cash equivalents to have minimal credit and market risk.

Certain of the Company’s cash accounts are zero-balance controlled disbursement accounts that do not have the right of offset against the Company’s other cash balances. The Company presents the outstanding checks written against these zero-balance accounts as a component of accounts payable in the accompanying consolidated balance sheets. Outstanding checks included as a component of accounts payable totaled $47.7 million and $23.1 million at December 31, 2011 and 2010, respectively.

Inventory

Inventory recorded in current assets includes $7.8 million at December 31, 2011 and $10.0 million at December 31, 2010, for natural gas in underground storage owned by the Company’s E&P segment, and $38.4 million at December 31, 2011 and $25.1 million at December 31, 2010 for tubulars and other equipment used in the E&P segment.

The Company has one natural gas storage facility. The current portion of the natural gas is classified in inventory and carried at the lower of cost or market. The non-current portion of the natural gas is classified in property and equipment and carried at cost. The carrying value of the non-current natural gas is evaluated for recoverability whenever events or changes in circumstances indicate that it may not be recoverable. Withdrawals of current natural gas in underground storage are accounted for by a weighted average cost method whereby natural gas withdrawn from storage is relieved at the weighted average cost of current natural gas remaining in the facility.

Other assets include $19.5 million at December 31, 2011 and $20.6 million at December 31, 2010 for inventory held by the Midstream Services segment consisting primarily of pipe that will be used to construct gathering systems.   

Tubulars and other equipment are carried at the lower of cost or market and are accounted for by a moving weighted average cost method that is applied within specific classes of inventory items. Purchases of inventory are recorded at cost and inventory is relieved at the weighted average cost of items remaining within a specified class.

Property, Depreciation, Depletion and Amortization

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, less accumulated amortization and related deferred income taxes, are subject to a ceiling test that limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved natural gas and oil reserves discounted at 10 percent (standardized measure) plus the lower of cost or market value of unproved properties. 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 and oil prices may subsequently increase the ceiling. Full cost companies must use the average quoted price from the first day of each month from the previous 12 months, including the impact of derivatives qualifying as cash flow hedges, to calculate the ceiling value of their reserves.

Using the average quoted price from the first day of each month from the previous 12 months for Henry Hub natural gas of $4.12 per MMBtu and $92.71 per barrel for West Texas Intermediate oil, adjusted for market differentials, the Company’s net book value of its United States natural gas and oil properties did not exceed the ceiling amount and did not result in a ceiling test impairment at December 31, 2011. Cash flow hedges of natural gas production in place increased this ceiling amount by approximately $262.5 million at December 31, 2011. At December 31, 2010, this ceiling amount of the Company’s reserves was calculated based upon average quoted market prices of $4.38 per MMBtu for Henry Hub natural gas and $75.96 per barrel for West Texas Intermediate oil, and at December 31, 2009, the ceiling value of the

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Company’s reserves was calculated based upon year-end quoted market prices of $3.87 per MMBtu for Henry Hub natural gas and $57.65 per barrel for West Texas Intermediate oil. 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.  At March 31, 2009, the net capitalized costs of our natural gas and oil properties exceeded the ceiling by approximately $558.3 million (net of tax) and resulted in a non-cash ceiling test impairment in the first quarter of 2009.

All of our costs directly associated with the acquisition and evaluation of properties in New Brunswick, Canada relating to our exploration program at December 31, 2011 were unproved and did not exceed the ceiling amount.  If our exploration program in Canada is unsuccessful on all or a portion of these properties, a ceiling test impairment may result in the future.

On December 31, 2009, the Company implemented certain provisions of FASB ASC 932, “Extractive Activities-Oil and Gas,” as updated by Accounting Standards Update No. 2010-03, “Extractive Activities-Oil and Gas (Topic 932)” (“FASB ASC 932”), which (a) expand the definition of oil- and gas-producing activities; (b) require energy companies to value their proved reserves by averaging the price from the first day of each month from the previous 12 months instead of using a year-end price; and (c) allow for additional drilling locations to be classified as proved undeveloped reserves assuming such locations are supported by reliable technologies. The Company accounted for the FASB ASC 932 changes as a change in accounting principle that is inseparable from a change in accounting estimate and will account for the change prospectively. The Company is not able to disclose the effects resulting from the implementation of these changes on the amount of proved reserves and disclosed quantities because personnel and time constraints made it infeasible for the Company to perform a second internal reserve estimation process under the prior standards on its approximately 4,850 properties.

Gathering Systems. The Company’s investment in gathering systems is primarily related to its Fayetteville Shale play in Arkansas and Marcellus Shale play in Pennsylvania.  These assets are being depreciated on a straight-line basis over 25 years.

Capitalized Interest. Interest is capitalized on the cost of unevaluated gas and oil properties that are excluded from amortization and actively being evaluated.

Asset Retirement Obligations.  An asset retirement obligation associated with the retirement of a tangible long-lived asset is recognized as a liability in the period incurred or when it becomes determinable, with an associated increase in the carrying amount of the related long-lived asset. The cost of the tangible asset, including the asset retirement cost, is depreciated over the useful life of the asset. The asset retirement obligation is recorded at its estimated fair value and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The Company owns natural gas and oil properties which require expenditures to plug and abandon the wells when reserves in the wells are depleted.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to the differences between the financial carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the tax rate in effect for the year in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change. Deferred income taxes are provided to recognize the income tax effect of reporting certain transactions in different years for income tax and financial reporting purposes.  A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

The Company accounts for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return. The tax benefit from an uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination by taxing authorities based on technical merits of the position. The amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The effective tax rate and the tax basis of assets and liabilities reflect management’s estimates of the ultimate outcome of various tax uncertainties.

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Derivative Financial Instruments

The Company uses derivative financial instruments to manage defined commodity price risks and does not use them for speculative trading purposes. The Company uses commodity swaps and options contracts to hedge sales of natural gas. Gains and losses resulting from the settlement of hedge contracts have been recognized in gas sales in the consolidated statements of operations when the contracts expire and the related physical transactions of the commodity hedged are recognized. Changes in the fair value of derivative instruments designated as cash flow hedges are reported in other comprehensive income (loss) to the extent that they are effective in offsetting the changes in the cash flows of the hedged item.  In contrast, gains and losses from the ineffective portion of swaps and option contacts as well as basis swap contracts that do not qualify for hedge accounting treatment are recognized currently in gas sales in the consolidated statements of operations.  Changes in the fair value of derivative instruments designated as fair value hedges as well as the offsetting gain or loss on the hedged item are recognized in earnings immediately.  See Note 5 for a discussion of the Company’s hedging activities.

Earnings Per Share

Basic earnings per common share attributable to Southwestern Energy stockholders is computed by dividing net income (loss) attributable to Southwestern Energy by the weighted average number of common shares outstanding during each year. The diluted earnings per share attributable to Southwestern Energy stockholders 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 and the vesting of unvested restricted shares of common stock.

For the year ended December 31, 2011, outstanding options for 3,577,104 shares with an average exercise price of $11.78 were included in the calculation of diluted shares. Options for 881,254 shares were excluded from the calculation because they would have had an antidilutive effect. For the year ended December 31, 2010, outstanding options for 4,753,530 shares with an average exercise price of $9.42 were included in the calculation of diluted shares. Options for 548,160 shares were excluded from the calculation because they would have had an antidilutive effect. For the year ended December 31, 2009, 6,683,085 of the Company’s outstanding options with an average exercise price of $8.33 were excluded from the calculation of diluted shares because they would have had an antidilutive effect. 

For the year ended December 31, 2011, 241,044 shares of restricted stock were included from the calculation of diluted shares. The calculation excluded 135,352 shares of restricted stock because they would have had an antidilutive effect. For the year ended December 31, 2010, 700,512 shares of restricted stock were included from the calculation of diluted shares. The calculation excluded 39,600 shares of restricted stock because they would have had an antidilutive effect. For the year ended December 31, 2009, the number of shares of restricted stock excluded from the calculation of diluted shares was 836,861 because they would have had an antidilutive effect.  

Supplemental Disclosures of Cash Flow Information

Supplemental disclosures of cash flow information (in thousands):

	For the years ended December 31,
	2011	2010	2009
	(in thousands)
Cash paid during the year for interest, net of amounts capitalized	$             19,159	$             24,049	$              16,453
Cash paid (received) during the year for income taxes	4,198	14,368	(41,469)
Increase in noncash property additions	30,389	46,588	28,951

Stock-Based Compensation

The Company accounts for stock-based compensation transactions using a fair value method and recognizes an amount equal to the fair value of the stock options and stock-based payment cost in either the consolidated statement of operations or capitalizes the cost into natural gas and oil properties or gathering systems included in property and equipment. Costs are capitalized when they are directly related to the acquisition, exploration and development activities of the Company’s natural gas and oil properties or directly related to the construction of the Company’s gathering systems.

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Treasury Stock

The Company maintains a non-qualified deferred compensation supplemental retirement savings plan for certain key employees whereby participants may elect to defer and contribute a portion of their compensation to a Rabbi Trust, as permitted by the plan. The Company includes the assets and liability of its supplemental retirement savings plan in its consolidated balance sheet. Shares of the Company’s common stock purchased under the non-qualified deferred compensation arrangement are held in the Rabbi Trust and are presented as treasury stock and carried at cost. As of December 31, 2011, 98,889 shares were accounted for as treasury stock, compared to 156,636 shares at December 31, 2010.

Foreign Currency Translation

We have designated the Canadian dollar as the functional currency for our operations in Canada.  The cumulative translation effects of translating the accounts from the functional currency into the U.S. dollar at current exchange rates are included as a separate component of stockholders' equity.

New Accounting Standards Implemented in this Report

In January 2011, we implemented certain provisions of Accounting Standards Update No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements” (“Update 2010-06”).  Update 2010-06 requires entities to provide a reconciliation of purchases, sales, issuance and settlements of anything valued with a Level 3 method, which is used to price the hardest to value instruments. The implementation did not have an impact on our results of operations, financial position or cash flows. 

In July 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (“Update 2011-05”), which amends Topic 200, Comprehensive Income. Update 2011-05 eliminates the option to present components of ‘other comprehensive income’ (“OCI”) in the statement of changes in stockholders’ equity, and requires presentation of total comprehensive income and components of net income in a single statement of comprehensive income, or in two separate, consecutive statements. Update 2011-05 requires presentation of reclassification adjustments for items transferred from OCI to net income on the face of the financial statements where the components of net income and the components of OCI are presented. The amendments do not change current treatment of items in OCI, transfer of items from OCI, or reporting items in OCI net of the related tax impact. Update 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011.  The implementation of these changes did not have an impact on the Company’s results of operations, financial position or cash flows.

Accounting Standards Not Yet Implemented

In May 2011, the FASB issued guidance on fair value measurement and disclosure requirements outlined in Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820)–Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“Update 2011-04”).  Update 2011-04 expands existing fair value disclosure requirements, particularly for Level 3 inputs, including: quantitative disclosure of the unobservable inputs and assumptions used in the measurement; description of the valuation processes in place and sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs; the level of items (in the fair value hierarchy) that are not measured at fair value in the balance sheet but whose fair value must be disclosed; and the use of a nonfinancial asset if it differs from the highest and best use assumed in the fair value measurement. The amendments in Update 2011-04 must be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011. The implementation of the disclosure requirement is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued guidance on offsetting assets and liabilities and disclosure requirements in Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“Update 2011-11”).  Update 2011-11 requires that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transaction s subject to an agreement similar to a master netting agreement.  In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements.  Update 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.  The implementation of the disclosure requirement is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.    

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In December 2011, the FASB issued guidance on accumulated other comprehensive income in Accounting Standards Update No. 2011-12,Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“Update 2011-12”).  Update 2011-12 defers the specific requirement to present items that are classified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income, as promulgated under Update 2011-05.  Update 2011-12 is effective for annual reporting periods beginning on or after December 15, 2011, and interim periods within those annual periods.  The Company is currently evaluating the impact that the implementation of the disclosure requirement is expected to have on the Company’s consolidated results of operations, financial position or cash flows.    

(2) DIVESTITURES

In May 2011, we sold certain oil and natural gas leases, wells and gathering equipment in East Texas for approximately $118.1 million.  The sale included only the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 9,717 net acres. The net production from the Haynesville and Middle Bossier Shale intervals in this acreage was approximately 7.0 MMcf per day and proved net reserves were approximately 37.1 Bcf when the sale was closed in May 2011.

At closing, the Company deposited $85.0 million of proceeds from this sale with a qualified intermediary to facilitate potential like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code. The remaining funds were classified as restricted cash in the consolidated balance sheet and, unless utilized for one or more like-kind exchange transactions, were restricted in their use until November 2011. For the year ended December 31, 2011, the Company utilized $82.1 million of these restricted funds for like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code.

In June 2010, we sold certain oil and natural gas leases, wells and gathering equipment in East Texas for approximately $357.8 million.  The sale included only the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 20,063 net acres. The net production from the Haynesville and Middle Bossier Shale intervals in this acreage was approximately 13.5 MMcf per day and proved net reserves were approximately 55.4 Bcf when the sale was closed in June 2010.  

(3) PREPAID EXPENSES

The components of prepaid expenses included in other current assets as of December 31, 2011 and 2010 consisted of the following:

	2011		2010
	(in thousands)
Prepaid drilling costs	$                42,775	$                  21,997
Prepaid insurance	7,275	7,690
Total	$                50,050	$                  29,687

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(4) NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)  

The Company’s natural gas and oil properties are located in the United States and Canada.

Net Capitalized Costs

The following table shows the capitalized costs of natural gas and oil properties and the related accumulated depreciation, depletion and amortization at December 31, 2011 and 2010:

	2011		2010
	(in thousands)
Proved properties	$      8,601,818		$         7,037,746
Unproved properties	942,890	(1)	712,117	(1)
Total capitalized costs	9,544,708		7,749,863
Less:  Accumulated depreciation, depletion and amortization	4,092,410		3,444,477
Net capitalized costs	$      5,452,298		$         4,305,386

(1)

Includes $27.9 and $10.7 million related to our exploration program in New Brunswick, Canada at December 31, 2011 and 2010, respectively.

The table below sets forth the composition of net unevaluated costs excluded from amortization as of December 31, 2011.

	2011	2010	2009	Prior	Total
	(in thousands)
Property acquisition costs	$         254,622	$         143,165	$           44,513	$         110,767	$      553,067	(1)
Exploration and development costs	190,240	20,844	29,527	67,335	307,946	(1)
Capitalized interest	14,651	12,901	10,261	44,064	81,877	(1)
	$         459,513	$         176,910	$           84,301	$         222,166	$       942,890

(1)

Property acquisition costs include $7.5 million, exploration costs include $19.2 million and capitalized interest includes $1.2 million related to our exploration program in New Brunswick, Canada.

Of the total net unevaluated costs excluded from amortization at December 31, 2011, approximately $83.2 million is related to unevaluated seismic costs in the Fayetteville Shale play, approximately $101.3 million is related to acquisition of undeveloped properties in the Company’s Fayetteville Shale play, approximately $179.4 million is related to acquisition of undeveloped properties in the Company’s Marcellus Shale play and approximately $245.0 million is related to acquisition of undeveloped properties in the Company’s New Ventures, excluding our exploration program in New Brunswick, Canada. The Company has $27.9 million of unevaluated costs related to its exploration program in Canada. Additionally, the Company has approximately $180.2 million of unevaluated costs related to costs of wells in progress. The remaining costs excluded from amortization are related to properties which are not individually significant and on which the evaluation process has not been completed. The timing and amount of property acquisition and seismic costs included in the amortization computation will depend on the location and timing of drilling wells, results of drilling, and other assessments. The Company is, therefore, unable to estimate when these costs will be included in the amortization computation.

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Costs Incurred in Natural Gas and Oil Exploration and Development

The table below sets forth capitalized costs incurred in natural gas and oil property acquisition, exploration and development activities:

	2011		2010		2009
	(in thousands, except per Mcfe amounts)
Proved property acquisition costs	$                 17		$                  —		$             4,372
Unproved property acquisition costs	262,886	(1)	229,909	(1)	115,217
Exploration costs	63,419	(2)	27,062	(2)	52,178
Development costs	1,633,784		1,524,453		1,358,109
Capitalized costs incurred	1,960,106		1,781,424		1,529,876
Full cost pool amortization per Mcfe	$              1.30		$               1.34		$               1.51

(1)

Includes $0.2 million and $2.5 million in 2011 and 2010, respectively, related to our exploration program in New Brunswick, Canada.

(2)

Includes $18.4 million and $8.2 million in 2011 and 2010, respectively, related to our exploration program in New Brunswick, Canada.

Capitalized interest is included as part of the cost of natural gas and oil properties. The Company capitalized $43.4 million, $32.9 million and $40.2 million during 2011, 2010 and 2009, respectively, based on the Company’s weighted average cost of borrowings used to finance the expenditures.

In addition to capitalized interest, the Company also capitalized internal costs of $147.7 million, $139.2 million and $112.9 million during 2011, 2010 and 2009, respectively. These internal costs were directly related to acquisition, exploration and development activities and are included as part of the cost of natural gas and oil properties.

Results of Operations from Natural Gas and Oil Producing Activities

The table below sets forth the results of operations from natural gas and oil producing activities:

	2011	2010	2009
	(in thousands)
Sales	$   2,100,488	$      1,890,444	$      1,593,231
Production (lifting) costs	(469,153)	(376,939)	(259,588)
Depreciation, depletion and amortization	(666,107)	(561,003)	(474,014)
Impairment of natural gas and oil properties	—	—	(907,812)
	965,228	952,502	(48,183)
Provision (benefit) for income taxes	376,049	371,281	(15,650)
Results of operations	$       589,179	$         581,221	$         (32,533)

The results of operations shown above exclude general and administrative expenses, and interest expense and are not necessarily indicative of the contribution made by our natural gas and oil operations to the Company’s consolidated operating results. Income tax expense is calculated by applying the statutory tax rates to the revenues less costs, including depreciation, depletion and amortization, and after giving effect to permanent differences and tax credits.

Natural Gas and Oil Reserve Quantities

The Company engaged the services of Netherland, Sewell & Associates, Inc. (“NSAI”), an independent petroleum engineering firm, to audit the reserves estimated by the Company’s reservoir engineers. In conducting its audit, the engineers and geologists of NSAI studied the Company’s major properties in detail and independently developed reserve estimates.  NSAI’s audit consists primarily of substantive testing, which includes a detailed review of the Company’s major properties and accounted for approximately 90%, 85% and 88% of the present worth of the Company’s total proved reserves at December 31, 2011, 2010 and 2009, respectively. A reserve audit is not the same as a financial audit and a reserve audit is less rigorous in nature than a reserve report prepared by an independent petroleum engineering firm containing its own estimate of reserves. Reserve estimates are inherently imprecise and the Company’s reserve estimates are generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, the Company’s estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.

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The following table summarizes the changes in the Company’s proved natural gas and oil reserves for 2011, 2010 and 2009 all of which were located in the United States:

	2011		2010		2009
	Natural		Natural		Natural
	Gas	Oil	Gas	Oil	Gas	Oil
	(MMcf)	(MBbls)	(MMcf)	(MBbls)	(MMcf)	(MBbls)
Proved reserves, beginning of year	4,929,980	1,219	3,650,303	1,059	2,175,528	1,507
Revisions of previous estimates	34,505	(125)	309,292	50	94,930	(346)
Extensions, discoveries and other additions	1,459,428	2	1,429,439	281	1,683,264	22
Production	(499,433)	(97)	(403,636)	(171)	(299,698)	(124)
Acquisition of reserves in place	13	—	—	—	1,795	—
Disposition of reserves in place	(37,286)	(3)	(55,418)	—	(5,516)	—
Proved reserves, end of year	5,887,207	996	4,929,980	1,219	3,650,303	1,059
Proved developed reserves:
Beginning of year	2,687,238	1,173	1,972,767	1,028	1,336,370	1,352
End of year	3,254,018	983	2,687,238	1,173	1,972,767	1,028
Proved undeveloped reserves:
Beginning of year	2,242,742	46	1,677,536	31	839,158	155
End of year	2,633,189	13	2,242,742	46	1,677,536	31

The Company has no reserves from synthetic gas, synthetic oil or nonrenewable natural resources intended to be upgraded into synthetic gas or oil.

Standardized Measure of Discounted Future Net Cash Flows

The following standardized measures of discounted future net cash flows relating to proved natural gas and oil reserves at December 31, 2011, 2010 and 2009 are calculated after income taxes and discounted using a 10% annual discount rate and do not purport to present the fair market value the Company’s proved gas and oil reserves:

	2011	2010	2009
	(in thousands)
Future cash inflows	$ 22,012,205	$    19,620,254	$    12,533,868
Future production costs	(8,080,207)	(6,826,915)	(4,488,884)
Future development costs	(3,425,185)	(3,025,433)	(2,367,206)
Future income tax expense	(3,366,175)	(3,143,571)	(1,569,242)
Future net cash flows	7,140,638	6,624,335	4,108,536
10% annual discount for estimated timing of cash flows	(3,689,838)	(3,610,585)	(2,306,718)
Standardized measure of discounted future net cash flows	$   3,450,800	$      3,013,750	$      1,801,818

Under the standardized measure, future cash inflows were estimated by applying an average price from the first day of each month from the previous 12 months, adjusted for known contractual changes, to the estimated future production of year-end proved reserves in 2011 and 2010, and utilized year-end pricing in 2009. Prices used for the standardized measure above were average market prices of $4.12 per MMBtu for natural gas and $92.71 per barrel for oil in 2011, average market prices of $4.38 per MMBtu for natural gas and $75.96 per barrel for oil in 2010, and year-end prices of $3.87 per MMBtu for natural gas and $57.65 per barrel for oil in 2009. Future cash inflows were reduced by estimated future production and development costs based on year-end costs to determine pre-tax cash inflows. Future income taxes were computed by applying the year-end statutory rate to the excess of pre-tax cash inflows over the Company’s tax basis in the associated proved gas and oil properties after giving effect to permanent differences and tax credits.

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Following is an analysis of changes in the standardized measure during 2011, 2010 and 2009:

	2011	2010	2009
	(in thousands)
Standardized measure, beginning of year	$   3,013,750	$      1,801,818	$      2,109,262
Sales and transfers of natural gas and oil produced, net of production costs	(1,632,156)	(1,516,571)	(1,330,256)
Net changes in prices and production costs	(381,131)	706,062	(1,321,404)
Extensions, discoveries, and other additions, net of future production and development costs	1,163,992	1,205,464	976,449
Acquisition of reserves in place	30	—	1,878
Sales of reserves in place	(11,761)	(6,269)	(4,430)
Revisions of previous quantity estimates	34,221	324,284	88,261
Accretion of discount	426,245	230,355	302,439
Net change in income taxes	(103,643)	(746,971)	413,399
Changes in estimated future development costs	70,492	(10,558)	204,005
Previously estimated development costs incurred during the year	564,894	353,560	218,625
Changes in production rates (timing) and other	305,867	672,576	143,590
Standardized measure, end of year	$   3,450,800	$      3,013,750	$      1,801,818

(5) DERIVATIVES AND RISK MANAGEMENT

The Company is exposed to volatility in market prices and basis differentials for natural gas and crude oil which impacts the predictability of its cash flows related to the sale of natural gas and oil. These risks are managed by the Company’s use of certain derivative financial instruments.  At December 31, 2011 and 2010, the Company’s derivative financial instruments consisted of price swaps, costless-collars and basis swaps. A description of the Company’s derivative financial instruments is provided below:

Fixed price swaps  

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

Floating price swaps

The Company receives a floating market price from the counterparty and pays a fixed price.

Costless-collars  

Arrangements that contain a fixed floor price (put) and a fixed ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, the Company receives the fixed price and pays the market price. If the market price is between the call and the put strike price, no payments are due from either party.

Basis swaps

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

GAAP requires that all derivatives be recognized in the balance sheet as either an asset or liability and be measured at fair value. Under GAAP, certain criteria must be satisfied in order for derivative financial instruments to be classified and accounted for as either a cash flow or a fair value hedge. Accounting for qualifying hedges requires a derivative’s gains and losses to be recorded either in earnings or as a component of other comprehensive income. Gains and losses on derivatives that are not elected for hedge accounting treatment or that do not meet hedge accounting requirements are recorded in earnings.

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

84 SWN

The balance sheet classification of the derivative financial instruments are summarized below at December 31, 2011 and 2010:

	Derivative Assets
	December 31, 2011		December 31, 2010
	Balance Sheet Classification	Fair Value	Balance Sheet Classification	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Fixed and floating price swaps	Hedging asset	$         333,479	Hedging asset	$           81,797
Costless-collars	Hedging asset	179,080	Hedging asset	48,582
Fixed and floating price swaps	Other assets	201,081	Other assets	5,086
Costless-collars	Other assets	―	Other assets	72,827
Total derivatives designated as hedging instruments		$         713,640		$         208,292
Derivatives not designated as hedging instruments:
Basis swaps	Hedging asset	$             1,906	Hedging asset	$                  33
Basis swaps	Other assets	1,797	Other assets	―
Total derivatives not designated as hedging instruments		$             3,703		$                  33
Total derivative assets		$         717,343		$         208,325
	Derivative Liabilities
	December 31, 2011		December 31, 2010
	Balance Sheet Classification	Fair Value	Balance Sheet Classification	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Fixed and floating price swaps	Hedging liability	$           11,849	Hedging liability	$             1,774
Costless-collars	Hedging liability	209	Hedging liability	3,903
Fixed and floating price swaps	Long-term hedging liability	―	Long-term hedging liability	22,334
Costless-collars	Long-term hedging liability	―	Long-term hedging liability	17,854
Total derivatives designated as hedging instruments		$           12,058		$           45,865
Derivatives not designated as hedging instruments:
Basis swaps	Hedging liability	$                400	Hedging liability	$             2,008
Basis swaps	Long-term hedging liability	55	Long-term hedging liability	―
Total derivatives not designated as hedging instruments		$                455		$             2,008
Total derivative liabilities		$           12,513		$           47,873

Cash Flow Hedges

The reporting of gains and losses on cash flow derivative hedging instruments depends on whether the gains or losses are effective at offsetting changes in the cash flows of the hedged item. The effective portion of the gains and losses on the derivative hedging instruments are recorded in other comprehensive income until recognized in earnings during the period that the hedged transaction takes place. The ineffective portion of the gains and losses from the derivative hedging instrument recognized in earnings immediately.

85 SWN

As of December 31, 2011, the Company had cash flow hedges on the following volumes of natural gas production and gas-in-underground storage (in Bcf):

Year	Fixed price swaps	Costless-collars
2012	185.9	80.5
2013	185.2	―

As of December 31, 2011, the Company recorded a gain in accumulated other comprehensive income related to its hedging activities of $424.9 million net of a deferred income tax liability of $276.2 million. The amount recorded in accumulated other comprehensive income will be relieved over time and recognized in the statement of operations as the physical transactions being hedged occur. Assuming the market prices of natural gas futures as of December 31, 2011 remain unchanged, the Company would expect to transfer an aggregate after-tax net gain of approximately $303.2 million from accumulated other comprehensive income to earnings during the next 12 months. Gains or losses from derivative instruments designated as cash flow hedges are reflected as adjustments to natural gas sales in the consolidated statements of operations. Natural gas sales included a realized gain from settled contracts of $320.1 million for the year ended December 31, 2011 compared to a realized gain of $301.5 million for the year ended December 31, 2010. Volatility in net income, comprehensive income and accumulated other comprehensive income may occur in the future as a result of the Company’s derivative activities.

The following tables summarize the before tax effect of all cash flow hedges on the consolidated financial statements for the years ended December 31, 2011 and 2010.

		Gain Recognized in Other Comprehensive Income (Effective Portion)
		For the years ended
		December 31,
Derivative Instrument		2011	2010
		(in thousands)
Fixed price swaps		$      714,740	$      166,722
Costless-collars		$      144,126	$      132,438
	Classification of Gain Reclassified from Accumulated Other	Gain Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)
	Comprehensive Income	For the years ended
	into Earnings	December 31,
Derivative Instrument	(Effective Portion)	2011	2010
		(in thousands)
Fixed price swaps	Gas Sales	$      256,229	$      230,707
Costless-collars	Gas Sales	$        65,047	$        70,775
		Loss Recognized in Earnings (Ineffective Portion)
	Classification of Loss	For the years ended
	Recognized in Earnings	December 31,
Derivative Instrument	(Ineffective Portion)	2011	2010
		(in thousands)
Fixed price swaps	Gas Sales	$        (4,018)	$        (4,769)
Costless-collars	Gas Sales	$           (137)	$        (1,999)

Fair Value Hedges

For fair value hedges, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item are recognized in earnings immediately. As of December 31, 2011 and December 31, 2010, the Company had no material fair value hedges.

86 SWN

Other Derivative Contracts

Although the Company’s basis swaps meet the objective of managing commodity price exposure, these trades are typically not entered into concurrent with the Company’s derivative instruments that qualify as cash flow hedges and therefore do not generally qualify for hedge accounting. Basis swap derivative instruments that do not qualify as cash flow hedges are recorded on the balance sheet at their fair values under hedging assets, other assets and hedging liabilities, as applicable and all realized and unrealized gains and losses related to these contracts are recognized immediately in the consolidated statements of operations as a component of natural gas sales.

As of December 31, 2011, the Company had basis swaps on natural gas production that did not qualify for hedge accounting treatment of 36.6 Bcf, 30.1 Bcf, and 9.1 Bcf for 2012, 2013, and 2014, respectively.

The following tables summarizes the before tax effect of basis swaps that did not qualify for hedge accounting on the uncondensed consolidated statements of operations for the years ended December 31, 2011 and 2010.

		Unrealized Gain Recognized in Earnings
	Income Statement	For the years ended
	Classification	December 31,
Derivative Instrument	of Unrealized Gain	2011	2010
		(in thousands)
Basis swaps	Gas Sales	$          5,222	$        11,434
		Realized Loss Recognized in Earnings
	Income Statement	For the years ended
	Classification	December 31,
Derivative Instrument	of Realized Loss	2011	2010
		(in thousands)
Basis swaps	Gas Sales	$         (2,135)	$       (12,098)

 (6) FAIR VALUE MEASUREMENTS

The carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2011 and 2010 were as follows:

	December 31, 2011		December 31, 2010
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
	(in thousands)
Cash and cash equivalents	$           15,627	$           15,627	$           16,055	$           16,055
Unsecured revolving credit facility	$         671,500	$         671,500	$         421,200	$         421,200
Senior notes	$         671,800	$         773,578	$         673,000	$         761,372
Derivative instruments, net	$         704,830	$         704,830	$         160,452	$         160,452

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, other current assets and current liabilities on the condensed 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 were based on the market for the Company’s publicly-traded debt as determined based on yield of the Company’s 7.5% Senior Notes due 2018, which was 4.6% at December 31, 2011 and 5.2% at December 31, 2010. The carrying values of the borrowings under the Company’s unsecured revolving credit facility at December 31, 2011 and 2010 approximate fair value.

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

87 SWN

GAAP establishes a fair value hierarchy that 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.

Pursuant to GAAP, the Company has classified its derivatives into these levels depending upon the data utilized to determine their fair values. The Company’s Level 2 fair value measurements include fixed-price and floating-price swaps and are estimated using internal discounted cash flow calculations using the NYMEX futures index. The Company’s Level 3 fair value measurements include costless-collars and basis swaps. The Company’s costless-collars are valued using the Black-Scholes model, an industry standard option valuation model, and takes into account inputs such as contract terms, including maturity, and market parameters, including assumptions of the NYMEX futures index, interest rates, volatility and credit worthiness. The Company’s basis swaps are estimated using internal discounted cash flow calculations based upon forward commodity price curves.  

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

	December 31, 2011
	Fair Value Measurements Using:
	Quoted Prices	Significant
	in Active	Other	Significant
	Markets	Observable Inputs	Unobservable Inputs	Assets (Liabilities)
	(Level 1)	(Level 2)	(Level 3)	at Fair Value
Derivative assets	$                         —	$                    534,560	$                      182,783	$                717,343
Derivative liabilities	—	(11,849)	(664)	(12,513)
Total	$                         —	$                    522,711	$                      182,119	$                704,830
	December 31, 2010
	Fair Value Measurements Using:
	Quoted Prices	Significant
	in Active	Other	Significant
	Markets	Observable Inputs	Unobservable Inputs	Assets (Liabilities)
	(Level 1)	(Level 2)	(Level 3)	at Fair Value
Derivative assets	$                         —	$                      86,883	$                      121,442	$                208,325
Derivative liabilities	—	(24,108)	(23,765)	(47,873)
Total	$                         —	$                      62,775	$                        97,677	$                160,452

The table below presents reconciliations for the change in net fair value of derivative assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and 2010. Level 3 instruments presented in the table consist of net derivatives valued using pricing models incorporating assumptions that, in the Company’s judgment, reflect the assumptions a marketplace participant would have used at December 31, 2011 and at December 31, 2010.

88 SWN

Total net gains and losses for Level 3 derivatives for the years ended December 31, 2011 and 2010 are provided below:

	For the years ended December 31,
	2011	2010
	(in thousands)
Balance at beginning of period	$                97,677	$                24,720
Total gains or losses (realized/unrealized):
Included in earnings	67,998	68,111
Included in other comprehensive income	79,215	63,522
Purchases, issuances and settlements
Purchases	—	—
Issuances	—	—
Settlements	(62,913)	(58,676)
Transfers into/out of Level 3	142	—
Balance at end of period	$              182,119	$                97,677
Change in unrealized gain (loss) included in earnings relating to derivatives still held as of December 31	$                  5,085	$                  9,435

(7) DEBT

The components of debt as of December 31, 2011 and 2010 consisted of the following:

	2011		2010
	(in thousands)
Short-term debt:
7.15% Senior Notes due 2018	$                  1,200	$                    1,200
Total short-term debt	1,200	1,200
Long-term debt:
Variable rate (2.276% at December 31, 2011 and 0.887% at December 31, 2010) unsecured revolving credit facility, expires February 2016	671,500	421,200
7.5% Senior Notes due 2018	600,000	600,000
7.35% Senior Notes due 2017	15,000	15,000
7.125% Senior Notes due 2017	25,000	25,000
7.15% Senior Notes due 2018	30,600	31,800
	1,342,100	1,093,000
Total debt	$          1,343,300	$             1,094,200

The following is a summary of scheduled long-term debt maturities by year as of December 31, 2011 (in thousands):

2012	$                  1,200
2013	1,200
2014	1,200
2015	1,200
2016	672,700
Thereafter	665,800
	$           1,343,300

Issuance of Senior Notes and Subsidiary Guarantees  

In January 2008, the Company completed an offering of $600 million Senior Notes with a coupon rate of 7.5% (“7.5% Senior Notes”), a maturity in February 2018 and semi-annual interest payments. Upon a “change of control,” as defined in the indenture, holders have the option to require the Company to purchase all or any portion of the notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest before the change of control date.

89 SWN

The indentures governing the Company’s senior notes contain covenants that, among other things, restrict the ability of the Company and/or its subsidiaries’ ability to incur liens, to engage in sale and leaseback transactions and to merge, consolidate or sell assets.  All of the Company’s senior notes are currently guaranteed by its subsidiaries, SEECO, Inc. (“SEECO”), Southwestern Energy Production Company (“SEPCO”) and Southwestern Energy Services Company (“SES”).  If no default or event of default has occurred and is continuing, these guarantees will be released (i) automatically upon any sale, exchange or transfer of all of the Company’s equity interests in the guarantor; (ii) automatically upon the liquidation and dissolution of a guarantor; (iii) following delivery of notice to the trustee of the release of the guarantor of its obligations under the Company’s credit facility; and (iv) upon legal or covenant defeasance or other satisfaction of the obligations under the notes.  

Please refer to Note 15, “Condensed Consolidating Financial Information” in this Form 10-K for additional information.

Credit Facility  

In February 2011, the Company amended and restated its unsecured revolving credit facility, increasing the borrowing capacity to $1.5 billion and extending the maturity date to February 2016 (“Credit Facility”).  The amount available under the Credit Facility may be increased to $2.0 billion at any time upon the Company’s agreement with its existing or additional lenders. The Company had $671.5 and $421.2 million outstanding under its revolving credit facility at December 31, 2011 and December 31, 2010, respectively. The interest rate on the amended credit facility is calculated based upon our debt rating and is currently 200 basis points over the current London Interbank Offered Rate (LIBOR) and was 200 basis points over LIBOR at December 31, 2011. The Credit Facility is guaranteed by the Company’s subsidiary, SEECO.  The Credit Facility requires additional subsidiary guarantors if certain guaranty coverage levels are not satisfied.  The revolving credit facility contains covenants which impose certain restrictions on the Company. Under the credit agreement, the Company may not issue total debt in excess of 60% of its total capital and must maintain a ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) to interest expense of 3.5 or above. The terms of the Credit Facility also include covenants that restrict the ability of the Company and its material subsidiaries to merge, consolidate or sell all or substantially all of their assets, restrict the ability of the Company and its subsidiaries to incur liens and restrict the ability of the Company’s subsidiaries to incur indebtedness.  At December 31, 2011, the Company’s capital structure consisted of 25% debt and 75% equity and it was in compliance with the covenants of its debt agreements.  While the Company believes all of the lenders under the Credit Facility have the ability to provide funds, it cannot predict whether each will be able to meet its obligation under the facility.

Interest Payments

Total cash interest payments made by the Company were $64.8 million in 2011, $57.0 million in 2010 and $56.7 million in 2009.

(8) COMMITMENTS AND CONTINGENCIES

Operating Commitments and Contingencies

The Company has commitments to third parties for demand transportation charges. At December 31, 2011, future payments under non-cancelable demand charges are approximately $212.2 million in 2012, $218.8 million in 2013, $234.3 million in 2014, $233.7 million in 2015, $236.2 million in 2016 and $960.5 million thereafter.

Southwestern leases 14 drilling rigs and equipment for its E&P operations under leases that expire on January 1, 2015. The Company’s current aggregate annual payment under the leases is approximately $19.4 million. The lease payments for the drilling rigs and equipment, as well as other operating expenses for the Company’s drilling operations, are capitalized to natural gas and oil properties and are partially offset by billings to third-party working interest owners for their share of rig day-rate charges.

The Company leases compressors, aircraft, vehicles, office space and equipment under non-cancelable operating leases expiring through 2019.  At December 31, 2011, future minimum payments under these non-cancelable leases accounted for as operating leases are approximately $69.9 million in 2012, $65.0 million in 2013, $57.7 million in 2014, $33.5 million in 2015, $25.9 million in 2016 and $16.2 million thereafter. The Company also has commitments for compression services related to its Midstream Services and E&P segments. At December 31, 2011, future minimum payments under these non-cancelable agreements are approximately $42.1 million in 2012, $30.0 million in 2013, $15.7 million in 2014, $9.6 million in 2015, $8.0 million in 2016 and $1.7 million thereafter.

90 SWN

During 2011, SES entered into a number of short and long term firm transportation service and gathering agreements in support of our growing Marcellus Shale operations in Pennsylvania. In March 2011, SES entered into a precedent agreement with Millennium Pipeline Company, L.L.C. pursuant to which it will enter into short and long term firm natural gas transportation services on Millennium’s existing system and expansions of the system are expected to be in-service by late 2012 and late 2013.  In June 2011, SES entered into a long term agreement with Bluestone Gathering, a wholly owned subsidiary of DTE Energy Company, pursuant to which Bluestone Gathering will build and operate a natural gas gathering system in Susquehanna County, Pennsylvania and Broome County, New York, and provide gathering services to SES in support of a portion of our future Marcellus Shale natural gas production.  The projected in-service date for the gathering system is expected to be during the third quarter of 2012.  SES also executed firm transportation agreements with Tennessee Gas Pipeline Company (“TGP”) that increase our ability to move its Marcellus Shale natural gas production in the short term to market as well as a precedent agreement for an expansion project with a projected in-service date of November 2013 pursuant to which SES has subscribed for 100,000 Dekatherm/day of capacity.  TGP’s expansion project will expand its 300 Line in Pennsylvania to provide natural gas transportation from the Marcellus Shale supply area to existing delivery points on the TGP system.  TGP filed a certificate application for the project with the Federal Energy Regulatory Commission in late 2011. Pending regulatory approvals, construction would begin in 2013, with a November 1, 2013 in-service date.   

We have provided certain guarantees of a portion of SES’s obligations under these agreements.  As of December 31, 2011, SES’s obligations for demand and similar charges under the firm transportation agreements totaled approximately $2.1 billion and we currently have not recognized any guarantee obligations with respect to the firm transportation agreements and the gathering project and services.  

On October 6, 2011, the Company’s subsidiary, Southwestern Energy Production Company (“SEPCO”), entered into a 15-year agreement with a subsidiary of Boardwalk Pipeline Partners for the construction of a gathering system in Susquehanna and Lackawanna counties in Pennsylvania, which once constructed is expected to have a delivery capacity of 275,000 Dekatherm/day.

In the first quarter of 2010, the Company was awarded exclusive licenses by the Province of New Brunswick in Canada to conduct an exploration program covering approximately 2.5 million acres in the province. The licenses require the Company to make certain capital investments in New Brunswick of approximately $47 million Canadian dollars (“CAD”) in the aggregate over a three year period. In order to obtain the licenses, the Company provided promissory notes payable on demand to the Minister of Finance of the Province of New Brunswick with an aggregate principal amount of CAD $44.5 million. The promissory notes secure the Company's capital expenditure obligations under the licenses and are returnable to the Company to the extent the Company performs such obligations. If the Company fails to fully perform, the Minister of Finance may retain a portion of the applicable promissory notes in an amount equal to any deficiency. The Company commenced its Canada exploration program in 2010 and, as of December 31, 2011 had invested CAD $28.5 million in New Brunswick.  No liability has been recognized in connection with the promissory notes due to the Company’s investments in New Brunswick as of December 31, 2011 and its future investment plans.

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 or reported results of operations of the Company.

Litigation

In February 2009, SEPCO was added as a defendant in a Third Amended Petition in the matter of Tovah Energy, LLC and Toby Berry-Helfand v. David Michael Grimes, et, al.  In the Sixth Amended Petition, filed in July 2010, in the 273rd District Court in Shelby County, Texas (collectively, the “Sixth Petition”), plaintiff alleged that, in 2005, they provided SEPCO with proprietary data regarding two prospects in the James Lime formation pursuant to a confidentiality agreement and that SEPCO refused to return the proprietary data to the plaintiff, subsequently acquired leases based upon such proprietary data and profited therefrom.  Among other things, the plaintiff’s allegations in the Sixth Petition included various statutory and common law claims, including, but not limited to claims of misappropriation of trade secrets, violation of the Texas Theft Liability Act, breach of fiduciary duty and confidential relationships, various fraud based claims and breach of contract, including a claim of breach of a purported right of first refusal on all interests acquired by SEPCO between February 15, 2005 and February 15, 2006.  In the Sixth Petition, plaintiff sought actual damages of over $55 million as well as other remedies, including special damages and punitive damages of four times the amount of actual damages established at trial.

91 SWN

Immediately before the commencement of the trial in November 2010, plaintiff was permitted, over SEPCO’s objections, to file a Seventh Amended Petition claiming actual damages of $46 million and also seeking the equitable remedy of disgorgement of all profits for the misappropriation of trade secrets and the breach of fiduciary duty claims. In December 2010, the jury found in favor of the plaintiff with respect to all of the statutory and common law claims and awarded $11.4 million in compensatory damages. The jury did not, however, award the plaintiff any special, punitive or other damages. In addition, the jury separately determined that SEPCO’s profits for purposes of disgorgement were $381.5 million. This profit determination does not constitute a judgment or an award. The plaintiff’s entitlement to disgorgement of profits as an equitable remedy will be determined by the judge and it is within the judge’s discretion to award none, some or all the amount of profit to the plaintiff.  On December 31, 2010, the plaintiff filed a motion to enter the judgment based on the jury’s verdict.  On February 11, 2011, SEPCO filed a motion for a judgment notwithstanding the verdict and a motion to disregard certain findings.  On March 11, 2011, the plaintiff filed an amended motion for judgment and intervenor filed its motion for judgment seeking not only the monetary damages and the profits determined by the jury but also seeking, as a new remedy, a constructive trust for profits from 143 wells as well as future drilling and sales of properties in the prospect areas.  A hearing on the post-verdict motions was held on March 14, 2011.  At the suggestion of the judge, all parties voluntarily agreed to participate in non-binding mediation efforts.  The mediation occurred on April 6, 2011 and was unsuccessful. On June 6, 2011, SEPCO received by mail a letter dated June 2, 2011 from the judge, in which he made certain rulings with respect to the post-verdict motions and responses filed by the parties. In his rulings, the judge denied SEPCO’s motion for judgment, judgment notwithstanding the verdict and to disregard certain findings. Plaintiff’s and intervenor’s claim for a constructive trust was denied but the judge ruled that plaintiff and intervenor shall recover from SEPCO $11.4 million and a reasonable attorney’s fee of 40% of the total damages awarded and are entitled to recover on their claim for disgorgement.  The judge instructed that SEPCO calculate the profit on the designated wells for each respective period.  SEPCO performed the calculation and provided it to the judge in June 2011.  On July 5, 2011, plaintiff and intervenor filed a letter with the court raising objections to the accounting provided by SEPCO, to which SEPCO filed a response on July 11, 2011.  On July 12, 2011, the judge sent a letter to the parties in which he ruled that after reviewing the parties’ respective position letters, he was awarding $23.9 million in disgorgement damages in favor of the plaintiff and intervenor.  In the July 12, 2011 letter, the judge instructed the plaintiff and intervenor to prepare a judgment for his approval prior to July 21, 2011 consistent with his findings in his June 2, 2011 letter and the disgorgement award.  On August 24, 2011, a judgment was entered pursuant to which plaintiff and intervenor are entitled to recover approximately $11.4 million in actual damages and approximately $23.9 million in disgorgement as well as prejudgment interest and attorneys' fees which currently are estimated to be up to $8.9 million and all costs of court of the plaintiff and intervenor.  On September 23, 2011, SEPCO filed a motion for a new trial and on November 18, 2011 filed a notice of appeal.  On November 30, 2011, the court approved SEPCO’s supersedeas bond in the amount of $14.1 million, which stays execution on the judgment pending appeal.  The bond covers the $11.4 million judgment for actual damages, plus $1.3 million in pre-judgment interest, $1.3 million in post-judgment interest (estimating two years for the duration of appeal), and court costs.

The Company believes that SEPCO has a number of legal grounds for appealing the judgment, all of which will be vigorously pursued.  Based on the Company's understanding and judgment of the facts and merits of this case, including appellate defenses, and after considering the advice of counsel, the Company has determined that, although reasonably possible after exhaustion of all appeals, an adverse final outcome to this lawsuit is not probable.  As such, the Company has not accrued any amounts with respect to this lawsuit.  If the plaintiff and intervenor were to ultimately prevail in the appellate process, the Company currently estimates, based on the judgments to date, that SEPCO’s potential liability would be up to $44.2 million, including interest and attorney’s fees.  The Company’s assessment may change in the future due to occurrence of certain events, such as denied appeals, and such re-assessment could lead to the determination that the potential liability is probable and could be material to the Company's results of operations, financial position or cash flows.

On February 20, 2012, the Company became aware that SEPCO was named as a defendant in the matter of Gery Muncey v. Southwestern Energy Production Company, et al filed in the District Court of San Augustine County in Texas on January 31, 2012.  The plaintiff in this case is also the intervenor in the Tovah Energy matter described above and alleges various claims including fraud, misappropriation and breach of fiduciary duty that are purported as independent of the claims alleged in the Tovah Energy matter but arise from the substantially same circumstances involved in the Tovah Energy matter.  The plaintiff is seeking value for various royalty and override ownership interests in wells drilled, disgorgement of profits and punitive damages.  The Company has not accrued any amounts with respect to this lawsuit and cannot reasonably estimate the amount of any potential liability based on the Company’s understanding and judgment of the facts and merits of this case.

In March 2010, the Company’s subsidiary, SEECO, Inc., was served with a subpoena from a federal grand jury in Little Rock, Arkansas.  Based on the documents requested under the subpoena and subsequent discussions described below, the Company believes the grand jury is investigating matters involving approximately 27 horizontal wells operated by SEECO in Arkansas, including whether appropriate leases or permits were obtained therefor and whether royalties and other production attributable to federal lands have been properly accounted for and paid.  The Company believes it has

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fully complied with all requests related to the federal subpoena and delivered its affidavit to that effect. The Company and representatives of the Bureau of Land Management and the U.S. Attorney have had discussions since the production of the documents pursuant to the subpoena.  In January 2011, the Company voluntarily produced additional materials informally requested by the government arising from these discussions.  Although, to the Company’s knowledge, no proceeding in this matter has been initiated against SEECO, the Company cannot predict whether or when one might be initiated. The Company intends to fully comply with any further requests and to cooperate with any related investigation. No assurance can be made as to the time or resources that will need to be devoted to this inquiry or the impact of the final outcome of the discussions or any related proceeding.

We are subject to various litigation, claims and proceedings that have arisen in the ordinary course of business. Management believes, individually or in aggregate, such litigation, claims and proceedings will not have a material adverse impact on our financial position or our results of operations but these matters are subject to inherent uncertainties and management’s view may change in the future. If an unfavorable final outcome were to occur, there exists the possibility of a material impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. We accrue for such items when a liability is both probable and the amount can be reasonably estimated.

Indemnifications

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

(9) INCOME TAXES

The provision (benefit) for income taxes included the following components:

	2011	2010	2009
	(in thousands)
Current:
Federal	$           3,378	$           10,421	$         (65,309)
State	820	1,518	340
	4,198	11,939	(64,969)
Deferred:
Federal	345,922	319,279	48,308
State	60,941	59,982	298
Foreign	2,160	459	—
	409,023	379,720	48,606
Provision (benefit) for income taxes	$       413,221	$         391,659	$         (16,363)

The provision for income taxes was an effective rate of 39.3% in 2011, 39.3% in 2010 and 31.5% in 2009. The following reconciles the provision for income taxes included in the consolidated statements of operations with the provision which would result from application of the statutory federal tax rate to pre-tax financial income:  

	2011	2010	2009
	(in thousands)
Expected provision (benefit) at federal statutory rate	$       367,854	$         348,632	$         (18,205)
Increase (decrease) resulting from:
State income taxes, net of federal income tax effect	40,145	39,975	415
Nondeductible expenses	1,244	660	1,497
Other	3,978	2,392	(70)
Provision (benefit) for income taxes	$       413,221	$         391,659	$         (16,363)

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The components of the Company’s net deferred tax liability as of December 31, 2011 and 2010 were as follows:

	2011	2010
	(in thousands)
Deferred tax liabilities:
Differences between book and tax basis of property	$      1,916,619	$         1,411,240
Cash flow hedges	276,063	61,394
Other	15,755	14,122
	2,208,437	1,486,756
Deferred tax assets:
Accrued compensation	30,316	16,279
Alternative minimum tax credit carryforward	73,516	70,138
Stored natural gas	9,053	7,145
Accrued pension costs	3,982	6,227
Asset retirement obligations	13,188	10,848
Net operating loss carryforward	287,830	192,086
Other	9,591	9,652
	427,476	312,375
Net deferred tax liability	$      1,780,961	$         1,174,381

The net deferred tax liability at December 31, 2011 was comprised of net long-term deferred income tax liabilities of $1,586.8 million in addition to a net current deferred income tax liability of $194.2 million.  The net deferred tax liability at December 31, 2010 was comprised of net long-term deferred income tax liabilities of $1,130.3 million, in addition to a net current deferred income tax liability of $44.1 million.  In 2011, the Company paid $0.8 million in state income taxes and paid $3.4 million in alternative minimum taxes.  In 2010, the Company paid $0.4 million in state income taxes and paid $14.0 million in alternative minimum taxes. The Company’s net operating loss carryforward at December 31, 2011 was $878.2 million and has expiration dates of 2027 through 2031. The Company also had an alternative minimum tax credit carryforward of $73.5 million and a statutory depletion carryforward of $13.0 million at December 31, 2011.

Deferred tax assets relating to tax benefits of employee stock option grants have been reduced to reflect exercises in 2011. Some exercises resulted in tax deductions in excess of previously recorded benefits based on the option value at the time of the grant (“windfalls”). Although these additional tax benefits or “windfalls” are reflected in net operating loss carryforwards, pursuant to GAAP, the additional tax benefit associated with the windfall is not recognized until the deduction reduces taxes payable. Accordingly, since the tax benefit does not reduce our current taxes payable in 2011 due to net operating loss carryforwards, these “windfall” tax benefits are not reflected in our net operating losses in deferred tax assets for 2011. Windfalls included in net operating loss carryforwards but not reflected in deferred tax assets for 2011 were $110.3 million.  The Company utilized a portion of its net operating loss carryforward in 2010 based on its federal income tax return filing. Therefore, an additional tax return benefit associated with the windfall was recognized in 2011.

As of December 31, 2011, the Company has no unrecognized tax benefits.  The income tax years 2008 and 2009 have been audited by the Internal Revenue Service resulting in no changes to the Company’s taxes. The income tax years 2009 to 2011 remain open to examination by the major taxing jurisdictions to which the Company is subject, except for the 2009 federal tax return for which the examination is complete.

The Company has an income tax net operating loss carryforward related to its Canadian operations of $11.0 million, and has expiration dates of 2030 through 2031. The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax asset associated with the Canadian net operating loss. Based on this assessment, the Company recorded a valuation allowance of $2.0 million, as of December 31, 2011, to reflect that it is more likely than not that the deferred tax asset will not be recognized. The Company recorded a valuation allowance of $0.5 million in 2010. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are increased.

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(10) ASSET RETIREMENT OBLIGATIONS

The following table summarizes the Company’s 2011 and 2010 activity related to asset retirement obligations:

	2011	2010
	(in thousands)
Asset retirement obligation at January 1	$          27,786	$            22,972
Accretion of discount	1,361	1,095
Obligations incurred	4,304	6,926
Obligations settled/removed	(883)	(477)
Revisions of estimates	5,125	(2,730)
Asset retirement obligation at December 31	$          37,693	$            27,786
Current liability	1,539	1,829
Long-term liability	36,154	25,957
Asset retirement obligation at December 31	$          37,693	$            27,786

(11) RETIREMENT AND EMPLOYEE BENEFIT PLANS

401(k) Defined Contribution Plan

The Company has a 401(k) defined contribution plan covering eligible employees. The Company expensed $1.9 million, $0.9 million and $0.8 million of contribution expense in 2011, 2010 and 2009, respectively. Additionally, the Company capitalized $3.8 million, $4.2 million and $3.3 million of contributions in 2011, 2010 and 2009, respectively, directly related to the acquisition, exploration and development activities of the Company’s natural gas and oil properties or directly related to the construction of the Company’s gathering systems.

Defined Benefit Pension and Other Postretirement Plans

Prior to January 1, 1998, the Company maintained a traditional defined benefit plan with benefits payable based upon average final compensation and years of service.  Effective January 1, 1998, the Company amended its pension plan to become a “cash balance” plan on a prospective basis for its non-bargaining employees. A cash balance plan provides benefits based upon a fixed percentage of an employee’s annual compensation. The Company’s funding policy is to contribute amounts which are actuarially determined to provide the plans with sufficient assets to meet future benefit payment requirements and which are tax deductible.

The postretirement benefit plan provides contributory health care and life insurance benefits. Employees become eligible for these benefits if they meet age and service requirements. Generally, the benefits paid are a stated percentage of medical expenses reduced by deductibles and other coverages.

Substantially all employees are covered by the Company’s defined benefit pension and postretirement benefit plans. The Company accounts for its defined benefit pension and other postretirement plans by recognizing the funded status of each defined pension benefit plan and other postretirement benefit plan on the Company’s balance sheet. In the event a plan is overfunded, the Company recognizes an asset. Conversely, if a plan is underfunded, the Company recognizes a liability.

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The following provides a reconciliation of the changes in the plans’ benefit obligations, fair value of assets, and funded status as of December 31, 2011 and 2010:

			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
	(in thousands)
Change in benefit obligations:
Benefit obligation at January 1	$         67,933	$           56,736	$           4,955	$             3,271
Service cost	9,323	7,096	1,354	1,089
Interest cost	3,671	3,249	252	195
Participant contributions	—	—	19	15
Actuarial loss	6,967	6,311	302	462
Benefits paid	(6,156)	(5,029)	(89)	(77)
Plan amendments	—	168	—	—
Settlements	—	(598)	—	—
Benefit obligation at December 31	$         81,738	$           67,933	$           6,793	$             4,955
			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
	(in thousands)
Change in plan assets:
Fair value of plan assets at January 1	$         56,949	$           46,689	$                 —	$                  —
Actual return/(loss) on plan assets	4,717	6,276	—	—
Employer contributions	12,513	9,667	70	62
Participant contributions	—	—	19	15
Benefits paid	(6,156)	(5,029)	(89)	(77)
Settlements	—	(654)	—	—
Fair value of plan assets at December 31	$         68,023	$           56,949	$                 —	$                  —
Funded status of plans at December 31	$       (13,715)	$         (10,984)	$         (6,793)	$           (4,955)

The Company uses a December 31 measurement date for all of its plans and had liabilities recorded for the underfunded status for each period as presented above.

The change in accumulated other comprehensive income related to the pension plans was a loss of $5.4 million ($3.3 million after tax) for the year ended December 31, 2011 and a loss of $2.4 million ($1.2 million after tax) for the year ended December 31, 2010. The change in accumulated other comprehensive income related to the other postretirement benefit plan was a loss of  $0.2 million ($0.1 million after tax) for the year ended December 31, 2011 and was a loss of $0.4 million ($0.2 million after tax) for the year ended December 31, 2010. Included in accumulated other comprehensive income at December 31, 2011 and 2010 was a $26.2 million loss ($15.9 million net of tax) and a $20.5 million loss ($12.5 million net of tax), respectively, related to the Company’s pension and other postretirement benefit plans.

The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during 2012 are $0.3   million for prior service costs, $1.2 million net loss and $0.1 million for transition obligation costs.

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The pension plans’ projected benefit obligation, accumulated benefit obligation and fair value of plan assets as of December 31, 2011 and 2010 are as follows:

	2011	2010
	(in thousands)
Projected benefit obligation	$            81,738	$              67,933
Accumulated benefit obligation	$            77,317	$              63,665
Fair value of plan assets	$            68,023	$              56,949

Pension and other postretirement benefit costs include the following components for 2011, 2010 and 2009:

				Other Postretirement
	Pension Benefits			Benefits
	2011	2010	2009	2011	2010	2009
	(in thousands)
Service cost	$       9,323	$        7,096	$        5,148	$       1,354	$         1,089	$           696
Interest cost	3,671	3,249	2,874	252	195	136
Expected return on plan assets	(4,398)	(3,503)	(2,809)	—	—	—
Amortization of transition obligation	—	—	—	64	65	65
Amortization of prior service cost	344	346	334	14	14	14
Amortization of net loss	856	806	846	11	21	7
Net periodic benefit cost	9,796	7,994	6,393	1,695	1,384	918
Settlements and curtailments	—	223	—	—	—	—
Total benefit cost	$       9,796	$        8,217	$        6,393	$       1,695	$         1,384	$           918

Amounts recognized in other comprehensive income for the year ended December 31, 2011 were as follows:

	Pension Benefits	Other Postretirement Benefits
	(in thousands)
Net actuarial loss arising during the year	$                (6,648)	$                     (302)
Amortization of transition obligation	—	64
Amortization of prior service cost	344	14
Amortization of net loss	856	11
Tax effect	2,210	88
	$                (3,238)	$                     (125)

The weighted average assumptions used in the measurement of the Company’s benefit obligations at December 31, 2011 and 2010 are as follows:

			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
Discount rate	5.00%	5.50%	5.00%	5.50%
Rate of compensation increase	4.50%	4.50%	n/a	n/a

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The weighted average assumptions used in the measurement of the Company’s net periodic benefit cost for 2011, 2010 and 2009 are as follows:

				Other Postretirement
	Pension Benefits			Benefits
	2011	2010	2009	2011	2010	2009
Discount rate	5.50%	5.75%	6.00%	5.50%	5.75%	6.00%
Expected return on plan assets	7.50%	7.50%	7.50%	n/a	n/a	n/a
Rate of compensation increase	4.50%	4.50%	4.50%	n/a	n/a	n/a

The expected return on plan assets for the various benefit plans is based upon a review of the historical returns experienced, combined with the future expected returns based upon the asset allocation strategy employed. The plans seek to achieve an adequate return to fund the obligations in a manner consistent with the federal standards of the Employee Retirement Income Security Act and with a prudent level of diversification.

For measurement purposes, the following trend rates were assumed for 2011 and 2010:

	2011	2010
Health care cost trend assumed for next year	9%	9%
Rate to which the cost trend is assumed to decline	5%	5%
Year that the rate reaches the ultimate trend rate	2031	2030

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:

	1% Increase	1% Decrease
	(in thousands)
Effect on the total service and interest cost components	$           235	$         (196)
Effect on postretirement benefit obligation	$           940	$         (788)

Pension Payments and Asset Management

In 2011, the Company contributed $12.5 million to its pension plans and $0.1 million to its other postretirement benefit plan. The Company expects to contribute $12.7 million to its pension plans and $0.2 million to its other postretirement benefit plan in 2012. No plan assets are expected to be returned to the Company during the next twelve months.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits	Other Postretirement Benefits
	(in thousands)
2012	$                   3,894	$                      150
2013	$                   4,808	$                      217
2014	$                   6,310	$                      322
2015	$                   6,183	$                      443
2016	$                   7,908	$                      657
Years 2017-2021	$                 54,647	$                   5,321

The Company’s overall investment strategy is to provide an adequate pool of assets to support both the long-term growth of plan assets and to ensure adequate liquidity exists for the near-term benefit payment of obligations to participants, retirees and beneficiaries. The Retirement Committee of the Company’s Board of Directors (“Retirement Committee”) administers the Company’s pension plan assets. The Retirement Committee believes long-term investment

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performance is a function of asset-class mix and restricts the composition of pension plan assets to a combination of cash and cash equivalents, domestic equity markets, international equity markets or investment grade fixed income assets.

The table below presents the allocations targeted by the Retirement Committee and the actual weighted-average asset allocation of the Company’s pension plan at December 31, 2011, by asset category. The asset allocation targets are subject to change and the Retirement Committee allows for its actual allocations to deviate from target as a result of current and anticipated market conditions.  Plan assets are periodically balanced whenever the allocation to any asset class falls outside of the specified range.

	Pension Plan Asset Allocations
Asset category:	Target	Actual
Equity securities:
U.S. large cap growth equity	6%	6%
U.S. large cap value equity	6%	5%
U.S. large cap core equity	15%	16%
U.S. small cap equity	3%	3%
Non-U.S. equity	25%	25%
Emerging markets equity	5%	5%
Fixed income and cash and cash equivalents	40%	40%
Total	100%	100%

Utilizing GAAP’s fair value hierarchy, the Company’s fair value measurement of pension plan assets at December 31, 2011 are as follows:

		Quoted Prices in Active Markets for Identical Assets	Significant Observable Inputs	Significant Unobservable Inputs
Asset category:	Total	(Level 1)	(Level 2)	(Level 3)
	(in thousands)
Equity securities:
U.S. large cap growth equity (1)	$                3,792	$                 3,792	$                      —	$                     —
U.S. large cap value equity (2)	3,689	3,689	—	—
U.S. large cap core equity (3)	10,849	—	10,849	—
U.S. small cap equity (4)	2,201	2,201	—	—
Non-U.S. equity (5)	16,719	16,719	—	—
Emerging markets equity (6)	3,377	—	3,377	—
Fixed income (7)	25,192	—	25,192	—
Cash and cash equivalents	2,204	2,204	—	—
Total	$              68,023	$               28,605	$               39,418	$                     —

(1)

Mutual fund that seeks to invest in a diversified portfolio of stocks with price appreciation growth opportunities.

(2)

Mutual fund that seeks to invest in a diversified portfolio of stocks that will increase in value over the long-term as well as provide current income.

(3)

An institutional fund that seeks to replicate the performance of the S&P 500 Index before fees.

(4)

Mutual fund that seeks to invest in a diversified portfolio of stocks with small market capitalizations.

(5)

Mutual funds that invest primarily in equity securities of companies domiciled outside of the United States, primarily in developed markets.

(6)

An institutional fund that invests primarily in the equity securities of companies domiciled in emerging markets.

(7)

An institutional fund that seeks to replicate the performance of the Barclays Capital Long-Term Corporate Bond Index before fees through a sampling process.

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Utilizing GAAP’s fair value hierarchy, the Company’s fair value measurement of pension plan assets at December 31, 2010 are as follows:

		Quoted Prices in Active Markets for Identical Assets	Significant Observable Inputs	Significant Unobservable Inputs
Asset category:	Total	(Level 1)	(Level 2)	(Level 3)
	(in thousands)
Equity securities:
Large cap growth equity (1)	$                5,937	$                 5,937	$                      —	$                     —
Large cap value equity (2)	5,838	5,838	—	—
Large cap core equity (3)	8,062	8,062	—	—
Small cap equity (4)	6,662	6,662	—	—
International equity (5)	8,333	8,333	—	—
Fixed income (6)	18,539	18,539	—	—
Cash and cash equivalents	3,578	3,578	—	—
Total	$              56,949	$               56,949	$                      —	$                     —

(1)

Mutual fund that seeks to invest in a diversified portfolio of stocks with price appreciation growth opportunities.

(2)

Mutual fund that seeks to invest in a diversified portfolio of stocks that will increase in value over the long-term as well as provide current income.

(3)

Mutual fund that seeks to replicate the Standards & Poor’s 500 index by investing at least 80% of assets in S&P 500 stocks.

(4)

Mutual fund that seeks to invest in a diversified portfolio of stocks with small market capitalizations.

(5)

Mutual fund that seeks to invest in a diversified portfolio of stocks and fixed income securities with at least 80% of its investments in securities issued in Europe or the Pacific Basin.

(6)

Mutual fund that seeks to invest in a diversified portfolio of bonds with investment grade quality United States (“U.S.”) dollar-denominated securities of U.S. issuers.

The Company’s pension plan assets that are classified as Level 1 are due to the pension plan’s investments comprising either cash or investments in open-ended mutual funds which produce a daily net asset value that is validated with a sufficient level of observable activity to support classification of the fair value measurement as Level 1. The Company’s Level 2 pension plan assets represent investments in institutional funds.  These equity securities can be redeemed on demand but are not actively traded. The fair values of these Level 2 securities are based upon the net asset values provided by the investment managers.  No concentration of risk arising within or across categories of plan assets exists due to any significant investments in a single entity, industry, country or investment fund.

 (12) STOCK-BASED COMPENSATION

The Southwestern Energy Company 2004 Stock Incentive Plan (2004 Plan) was adopted in February 2004 and approved by stockholders in May 2004. The 2004 Plan provides for the compensation of officers, key employees and eligible non-employee directors of the Company and its subsidiaries. The 2004 Plan replaced the Southwestern Energy Company 2000 Stock Incentive Plan (2000 Plan) and the Southwestern Energy Company 2002 Employee Stock Incentive Plan (2002 Plan) but did not affect prior awards under those plans which remained valid and some of which are still outstanding. The awards under the prior plans have been adjusted for stock splits as permitted under such plans.

The 2004 Plan provides for grants of options, stock appreciation rights, and shares of restricted stock and restricted stock units to employees, officers and directors that in the aggregate do not exceed 16,800,000 shares. The types of incentives that may be awarded are comprehensive and are intended to enable the Company’s board of directors to structure the most appropriate incentives and to address changes in income tax laws which may be enacted over the term of the 2004 Plan.

As initially adopted, the 2000 Plan provided for the grant of options, stock appreciation rights, shares of phantom stock, and shares of restricted stock to employees, officers and directors that in the aggregate did not exceed 1,250,000 shares of common stock. As initially adopted, the 2002 Plan provided for grants of options, stock appreciation rights, shares of phantom stock and shares of restricted stock that in the aggregate did not exceed 300,000 shares to employees who are not officers or directors of the Company under provisions of Section 16 of the Securities Exchange Act of 1934, as amended.

The Company may utilize treasury shares, if available, or authorized but unissued shares when a stock option is exercised or when restricted stock is granted.

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The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. All options are issued at fair market value at the date of grant and expire seven years from the date of grant for awards under the 2004 Plan and ten years from the date of grant for awards under all other plans. Generally, stock options granted to employees and directors vest ratably over three years from the grant date. The Company issues shares of restricted stock to employees and directors which generally vest over four years. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the individual grants with the exception of awards granted to participants who have reached retirement age or will reach retirement age during the vesting period. Restricted stock and stock options granted to participants on or after December 8, 2005 immediately vest upon death, disability or retirement (subject to a minimum of five years of service).

Stock Options

The Company recorded the following compensation costs related to stock options for the years ended December 31, 2011, 2010 and 2009:

	2011	2010	2009
	(in thousands)
Stock-based compensation cost related to stock options – general and administrative expense	$                 4,959	$                 4,706	$                 5,108
Stock-based compensation cost related to stock options – capitalized	$                 3,365	$                 2,679	$                 2,124

The Company also recorded a deferred tax benefit of $1.7 million related to stock options in 2011, compared to deferred tax benefits of $1.7 million in 2010 and $1.4 million in 2009. A total of $20.7 million of unrecognized compensation cost related to the Company’s unvested stock option and restricted stock grants. This cost is expected to be recognized over a weighted-average period of 2.1 years.

The fair value of stock options is estimated on the date of the grant using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table.  Expected volatility is based on historical volatility of the Company’s common stock and other factors.  The Company uses historical data on exercise of stock options, post vesting forfeitures and other factors to estimate the expected term of the stock-based payments granted. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.

Assumptions	2011	2010	2009
Risk-free interest rate	0.9%	2.0%	2.2%
Expected dividend yield	—	—	—
Expected volatility	58.1%	60.1%	61.6%
Expected term	5 years	5 years	5 years

The following tables summarize stock option activity for the years 2011, 2010 and 2009 and provide information for options outstanding at December 31 of such years:

	2011		2010		2009
		Weighted		Weighted		Weighted
		Average		Average		Average
	Number	Exercise	Number	Exercise	Number	Exercise
	of Shares	Price	of Shares	Price	of Shares	Price
Options outstanding at January 1	4,769,122	$      16.13	5,649,233	$        11.59	7,396,537	$          7.44
Granted	853,478	36.64	446,895	37.05	412,515	39.83
Exercised	(850,659)	7.54	(1,293,046)	3.01	(2,152,819)	2.67
Forfeited or expired	(30,209)	35.46	(33,960)	35.26	(7,000)	31.21
Options outstanding at December 31	4,741,732	$      21.24	4,769,122	$        16.13	5,649,233	$        11.59

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	Options Outstanding				Options Exercisable
			Weighted				Weighted
			Average				Average
		Weighted	Remaining	Aggregate		Weighted	Remaining	Aggregate
	Options	Average	Contractual	Intrinsic	Options	Average	Contractual	Intrinsic
Range of	Outstanding at	Exercise	Life	Value	Exercisable at	Exercise	Life	Value
Exercise Prices	December 31, 2011	Price	(Years)	(in thousands)	December 31, 2011	Price	(Years)	(in thousands)
$1.43 - $3.10	1,727,398	$       2.10	1.5		1,727,398	$       2.10	1.5
$3.11 - $30.00	862,650	22.19	2.1		856,544	22.14	2.1
$30.01 - $36.00	606,133	31.54	4.4		490,190	31.11	4.0
$36.01 - $40.00	1,130,705	36.77	6.5		153,086	36.86	5.5
$40.01 - $51.47	414,846	41.60	5.0		254,850	41.50	4.8
	4,741,732	$     21.24	3.5	$       60,505	3,482,068	$     15.53	2.4	$       60,484

The weighted-average grant-date fair value of options granted during the years 2011, 2010 and 2009 was $18.17, $19.40 and $21.35, respectively. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $27.0 million, $41.4 million and $87.6 million, respectively.

Restricted Stock

The Company recorded the following compensation costs related to restricted stock grants for the years ended December 31, 2011, 2010 and 2009:

	2011	2010	2009
	(in thousands)
Stock-based compensation cost related to restricted stock grants – general and administrative expense	$                 5,591	$                 5,114	$                 5,069
Stock-based compensation cost related to restricted stock grants – capitalized	$                 5,162	$                 4,107	$                 3,767

The Company also recorded a deferred tax liability of $2.1 million related to restricted stock for the year ended December 31, 2011, compared to deferred tax liabilities of $1.4 million for 2010 and $0.7 million for 2009. As of December 31, 2011, there was $34.0 million of total unrecognized compensation cost related to unvested shares of restricted stock that is expected to be recognized over a weighted-average period of 3.2 years.

The following table summarizes the restricted stock activity for the years 2011, 2010 and 2009 and provides information for restricted stock outstanding at December 31 of such years:

	2011		2010		2009
		Weighted		Weighted		Weighted
		Average		Average		Average
	Number	Grant Date	Number	Grant Date	Number	Grant Date
	of Shares	Fair Value	of Shares	Fair Value	of Shares	Fair Value
Unvested shares at January 1	834,058	$      36.24	794,529	$        33.70	843,430	$        27.66
Granted	532,754	36.41	390,415	36.46	319,950	39.03
Vested	(294,358)	34.90	(319,894)	30.45	(359,247)	24.37
Forfeited	(52,717)	36.45	(30,992)	33.54	(9,604)	29.47
Unvested shares at December 31	1,019,737	$      36.71	834,058	$        36.24	794,529	$        33.70

The fair values of the grants were $19.4 million for 2011, $14.2 million for 2010 and $12.5 million for 2009. The total fair value of shares vested were $10.9 million for 2011, $9.7 million for 2010 and $14.9 million for 2009.

102 SWN

(13) 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 crude oil. The Midstream Services segment generates revenue through the marketing of both Company and third-party produced natural gas volumes and through gathering fees associated with the transportation of natural gas to market.

Summarized financial information for the Company’s reportable segments is shown in the following table.  The accounting policies of the segments are the same as those described in Note 1. Management evaluates the performance of its segments based on operating income, defined as operating revenues less operating costs and expenses. 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 and other income (loss), net. The “Other” column includes items not related to the Company’s reportable segments including real estate and corporate items.

103 SWN

	Exploration
	And		Midstream
	Production		Services	Other	Total
	(in thousands)
2011
Revenues from external customers	$    2,088,763		$        864,096	$                  47	$    2,952,906
Intersegment revenues	11,725		1,995,423	3,221	2,010,369
Operating income	825,138		247,952	1,711	1,074,801
Other income, net(1)	328		(91)	27	264
Depreciation, depletion and amortization expense	666,125		37,261	1,125	704,511
Interest expense(1)	9,026		15,049	—	24,075
Provision for income taxes(1)	322,714		90,221	286	413,221
Assets	6,547,117	(2)	1,119,861	235,919	7,902,897
Capital investments(3)	1,977,493		160,776	68,905	2,207,174
2010
Revenues from external customers	$       1,871,835		$          738,828	$                   —	$       2,610,663
Intersegment revenues	18,609		1,715,012	984	1,734,605
Operating income	829,462		191,566	200	1,021,228
Other income, net(1)	235		179	13	427
Depreciation, depletion and amortization expense	561,018		28,765	549	590,332
Interest expense(1)	7,888		18,275	—	26,163
Provision for income taxes(1)	323,748		67,834	77	391,659
Assets	4,849,478	(2)	1,016,563	151,422	6,017,463
Capital investments(3)	1,775,518		271,316	73,231	2,120,065
2009
Revenues from external customers	$       1,582,596		$          562,944	$                 239	$       2,145,779
Intersegment revenues	10,635		1,040,388	448	1,051,471
Operating income (loss)	(157,725)		122,620	139	(34,966)
Other income, net(1)	1,406		34	9	1,449
Depreciation, depletion and amortization expense	474,014		19,213	431	493,658
Impairment of natural gas and oil properties	907,812		—	—	907,812
Interest expense(1)	15,237		3,401	—	18,638
Provision (benefit) for income taxes(1)	(61,725)		45,303	59	(16,363)
Assets	3,904,739	(2)	767,346	98,165	4,770,250
Capital investments(3)	1,565,450		214,208	29,459	1,809,117

(1)

Interest income, interest expense and the provision (benefit) for income taxes by segment are an allocation of corporate amounts as cash equivalents, debt and income tax expense allocated as they are incurred at the corporate level.

(2)

Includes capital investments for office, technology, drilling rigs and other ancillary equipment not directly related to natural gas and oil property acquisition, exploration and development activities.

(3)

Capital investments include an increase of $4.3 million for 2011, an increase of $14.4 million for 2010 and an increase of $12.2 million for 2009 related to the change in accrued expenditures between years.

Included in intersegment revenues of the Midstream Services segment are $1.7 billion, $1.5 billion and $0.9 billion for 2011, 2010 and 2009, respectively, for marketing of the Company’s E&P sales.  Corporate assets include cash and cash equivalents, restricted cash, furniture and fixtures, prepaid debt and other costs. Corporate general and administrative costs, depreciation expense and taxes other than income are allocated to the segments. For 2011 and 2010, capital investments within the E&P segment include $18.7 million and $10.7 million, respectively, related to the Company’s activities in Canada. At December 31, 2011, assets include $28.4 million and at December 31, 2010, assets include $11.5 million related to the Company’s activities in Canada.

104 SWN

(14) QUARTERLY RESULTS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended December 31, 2011 and 2010:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
	(in thousands, except per share amounts)
	2011
Operating revenues	$       676,335	$      765,166	$      767,255	$      744,150
Operating income	232,651	282,542	295,718	263,890
Net income	136,609	167,454	175,173	158,533
Net income attributable to Southwestern Energy	136,609	167,454	175,173	158,533
Earnings per share attributable to Southwestern Energy stockholders – Basic	0.39	0.48	0.50	0.47
Earnings per share attributable to Southwestern Energy stockholders – Diluted	0.39	0.48	0.50	0.45
	2010
Operating revenues	$         668,117	$         589,943	$         682,172	$         670,431
Operating income (loss)	288,090	206,317	270,136	256,685
Net income (loss)	171,768	122,009	160,638	149,418
Net income (loss) attributable to Southwestern Energy	171,797	122,069	160,741	149,511
Earnings per share attributable to Southwestern Energy stockholders – Basic	0.50	0.35	0.47	0.43
Earnings per share attributable to Southwestern Energy stockholders – Diluted	0.49	0.35	0.46	0.43

(15) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company is providing condensed consolidating financial information for SEECO, SEPCO and SES, its subsidiaries that are currently guarantors of the Company’s registered public debt, and for its other subsidiaries that are not guarantors of such debt. These wholly owned subsidiary guarantors have jointly and severally, fully and unconditionally guaranteed the Company’s 7.35% Senior Notes and 7.125% Senior Notes. The subsidiary guarantees (i) rank equally in right of payment with all of the existing and future senior debt of the subsidiary guarantors; (ii) rank senior to all of the existing and future subordinated debt of the subsidiary guarantors; (iii) are effectively subordinated to any future secured obligations of the subsidiary guarantors to the extent of the value of the assets securing such obligations; and (iv) are structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors.  In the case of each series of notes, if no default or event of default has occurred and is continuing, these guarantees will be released (i) automatically upon any sale, exchange or transfer of all of the Company’s equity interests in the guarantor; (ii) automatically upon the liquidation and dissolution of a guarantor; (iii) following delivery of notice to the trustee of the release of the guarantor of its obligations under the Company’s credit facility; and (iv) upon legal or covenant defeasance or other satisfaction of the obligations under the notes.

The Company has not presented separate financial and narrative information for each of the subsidiary guarantors because it believes that such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the guarantees. The following condensed consolidating financial information summarizes the results of operations, financial position and cash flows for the Company’s guarantor and non-guarantor subsidiaries.

105 SWN

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
	Parent	Guarantors	Non-Guarantors	Eliminations	Consolidated
	(in thousands)
Year ended December 31, 2011:
Operating revenues	$                         —	$          2,803,385	$              411,998	$            (262,477)	$           2,952,906
Operating costs and expenses:
Gas purchases	—	710,487	—	(1,396)	709,091
Operating expenses	—	380,154	118,713	(257,923)	240,944
General and administrative expenses	—	141,499	19,700	(3,158)	158,041
Depreciation, depletion and amortization	—	665,615	38,896	—	704,511
Taxes, other than income taxes	—	53,950	11,568	—	65,518
Total operating costs and expenses	—	1,951,705	188,877	(262,477)	1,878,105
Operating income	—	851,680	223,121	—	1,074,801
Other income, net	—	306	(42)	—	264
Equity in earnings of subsidiaries	637,769	—	—	(637,769)	—
Interest expense	—	11,277	12,798	—	24,075
Income (loss) before income taxes	637,769	840,709	210,281	(637,769)	1,050,990
Provision for income taxes	—	332,795	80,426	—	413,221
Net income (loss)	$              637,769	$              507,914	$              129,855	$            (637,769)	$              637,769
Year ended December 31, 2010:
Operating revenues	$                         —	$          2,488,105	$              318,232	$            (195,674)	$           2,610,663
Operating costs and expenses:
Gas purchases	—	612,745	—	(1,584)	611,161
Operating expenses	—	293,713	91,164	(193,106)	191,771
General and administrative expenses	—	127,022	19,525	(984)	145,563
Depreciation, depletion and amortization	—	559,845	30,487	—	590,332
Taxes, other than income taxes	—	44,200	6,408	—	50,608
Total operating costs and expenses	—	1,637,525	147,584	(195,674)	1,589,435
Operating income	—	850,580	170,648	—	1,021,228
Other income, net	—	242	185	—	427
Equity in earnings of subsidiaries	604,118	—	—	(604,118)	—
Interest expense	—	10,777	15,386	—	26,163
Income (loss) before income taxes	604,118	840,045	155,447	(604,118)	995,492
Provision for income taxes	—	330,879	60,780	—	391,659
Net income (loss)	604,118	509,166	94,667	(604,118)	603,833
Less: Net loss attributable to noncontrolling interest	—	(285)	—	—	(285)
Net income (loss) attributable to Southwestern Energy	$              604,118	$              509,451	$                94,667	$            (604,118)	$              604,118
Year ended December 31, 2009:
Operating revenues	$                         —	$          2,071,746	$              207,672	$            (133,639)	$           2,145,779
Operating costs and expenses:
Gas purchases	—	483,922	—	(1,086)	482,836
Operating expenses	—	201,964	66,682	(132,105)	136,541
General and administrative expenses	—	109,870	13,196	(448)	122,618
Depreciation, depletion and amortization	—	472,757	20,901	—	493,658
Impairment of natural gas & oil properties	—	907,812	—	—	907,812
Taxes, other than income taxes	—	33,935	3,345	—	37,280
Total operating costs and expenses	—	2,210,260	104,124	(133,639)	2,180,745
Operating income (loss)	—	(138,514)	103,548	—	(34,966)
Other income, net	—	1,388	61	—	1,449
Equity in earnings of subsidiaries	(35,650)	—	—	35,650	—
Interest expense	—	12,760	5,878	—	18,638
Income (loss) before income taxes	(35,650)	(149,886)	97,731	35,650	(52,155)
Provision (benefit) for income taxes	—	(53,549)	37,186	—	(16,363)
Net income (loss)	(35,650)	(96,337)	60,545	35,650	(35,792)
Less: Net loss attributable to noncontrolling interest	—	(142)	—	—	(142)
Net income (loss) attributable to Southwestern Energy	$              (35,650)	$              (96,195)	$                60,545	$                35,650	$               (35,650)

106 SWN

CONDENSED CONSOLIDATING BALANCE SHEETS
	Parent	Guarantors	Non- Guarantors	Eliminations	Consolidated
	(in thousands)
December 31, 2011:
ASSETS
Cash and cash equivalents	$          14,711	$                 ―	$               916	$                 ―	$          15,627
Accounts receivable	2,914	309,038	29,963	―	341,915
Inventories	―	45,260	974	―	46,234
Other current assets	6,087	563,635	4,780	―	574,502
Total current assets	23,712	917,933	36,633	―	978,278
Intercompany receivables	2,053,132	53	23,517	(2,076,702)	―
Property and equipment	180,300	9,731,944	1,148,575	―	11,060,819
Less: Accumulated depreciation, depletion and amortization	57,254	4,220,205	137,880	―	4,415,339
	123,046	5,511,739	1,010,695	―	6,645,480
Investments in subsidiaries (equity method)	3,256,195	―	―	(3,256,195)	―
Other assets	28,641	227,152	23,346	―	279,139
Total assets	$     5,484,726	$     6,656,877	$     1,094,191	$   (5,332,897)	$     7,902,897
LIABILITIES AND EQUITY
Accounts and notes payable	$        206,541	$        332,710	$          37,276	$                 ―	$        576,527
Other current liabilities	4,712	301,170	2,504	―	308,386
Total current liabilities	211,253	633,880	39,780	―	884,913
Intercompany payables	―	1,628,750	447,952	(2,076,702)	―
Long-term debt	1,342,100	―	―	―	1,342,100
Deferred income taxes	(97,045)	1,442,576	241,267	―	1,586,798
Other liabilities	59,114	54,826	5,842	―	119,782
Total liabilities	1,515,422	3,760,032	734,841	(2,076,702)	3,933,593
Commitments and contingencies
Total equity	3,969,304	2,896,845	359,350	(3,256,195)	3,969,304
Total liabilities and equity	$     5,484,726	$     6,656,877	$     1,094,191	$   (5,332,897)	$     7,902,897

107 SWN

CONDENSED CONSOLIDATING BALANCE SHEETS
	Parent	Guarantors	Non- Guarantors	Eliminations	Consolidated
	(in thousands)
December 31, 2010:
ASSETS
Cash and cash equivalents	$             8,381	$             7,631	$                  43	$                  ―	$           16,055
Accounts receivable	382	331,154	20,037	―	351,573
Inventories	―	34,263	835	―	35,098
Other current assets	5,015	171,060	2,092	―	178,167
Total current assets	13,778	544,108	23,007	―	580,893
Intercompany receivables	1,820,857	131	18,724	(1,839,712)	―
Investments	―	11,103	(11,102)	(1)	―
Property and equipment	124,823	7,871,279	984,783	―	8,980,885
Less: Accumulated depreciation, depletion and amortization	52,256	3,526,010	104,422	―	3,682,688
	72,567	4,345,269	880,361	―	5,298,197
Investments in subsidiaries (equity method)	2,253,871	―	―	(2,253,871)	―
Other assets	18,918	92,747	26,708	―	138,373
Total assets	$      4,179,991	$      4,993,358	$         937,698	$    (4,093,584)	$      6,017,463
LIABILITIES AND EQUITY
Accounts and notes payable	$         175,476	$         336,411	$           33,208	$                  ―	$         545,095
Other current liabilities	3,288	142,839	2,761	―	148,888
Total current liabilities	178,764	479,250	35,969	―	693,983
Intercompany payable	―	1,317,696	522,017	(1,839,713)	―
Long-term debt	1,093,000	―	―	―	1,093,000
Deferred income taxes	(98,206)	1,066,166	162,332	―	1,130,292
Other liabilities	41,557	89,986	3,769	―	135,312
Total liabilities	1,215,115	2,953,098	724,087	(1,839,713)	3,052,587
Commitments and contingencies
Total equity	2,964,876	2,040,260	213,611	(2,253,871)	2,964,876
Total liabilities and equity	$      4,179,991	$      4,993,358	$         937,698	$    (4,093,584)	$      6,017,463

108 SWN

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
	Parent	Guarantors	Non-Guarantors	Eliminations	Consolidated
	(in thousands)
Year ended December 31, 2011:
Net cash provided by operating activities	$        14,688	$   1,482,853	$      242,276	$                —	$   1,739,817
Investing activities:
Capital investments	(66,647)	(1,916,246)	(201,581)	—	(2,184,474)
Proceeds from sale of property and equipment	—	154,261	265	—	154,526
Transfers to restricted cash	(85,055)	—	—	—	(85,055)
Transfers from  restricted cash	85,055	—	—	—	85,055
Other	16,263	(43,961)	32,856	—	5,158
Net cash used in investing activities	(50,384)	(1,805,946)	(168,460)	—	(2,024,790)
Financing activities:
Intercompany activities	(242,277)	315,462	(73,185)	—	—
Payments on current portion of long-term debt	(1,200)	—	—	—	(1,200)
Payments on revolving long-term debt	(3,445,900)	—	—	—	(3,445,900)
Borrowings under revolving long-term debt	3,696,200	—	—	—	3,696,200
Other	35,203	—	—	—	35,203
Net cash provided by financing activities	42,026	315,462	(73,185)	—	284,303
Effect of exchange rate changes on cash	—	—	242	—	242
Increase (decrease) in cash and cash equivalents	6,330	(7,631)	873	—	(428)
Cash and cash equivalents at beginning of year	8,381	7,631	43	—	16,055
Cash and cash equivalents at end of year	$        14,711	$                —	$             916	$                —	$        15,627
Year ended December 31, 2010:
Net cash provided by operating activities	$        25,865	$   1,368,248	$      248,472	$                —	$   1,642,585
Investing activities:
Capital investments	(46,062)	(1,718,847)	(308,265)	—	(2,073,174)
Proceeds from sale of property and equipment	—	348,274	1,953	—	350,227
Transfers to restricted cash	(356,035)	—	—	—	(356,035)
Transfers from  restricted cash	356,035	—	—	—	356,035
Other	11,864	(22,719)	8,171	—	(2,684)
Net cash used in investing activities	(34,198)	(1,393,292)	(298,141)	—	(1,725,631)
Financing activities:
Intercompany activities	(76,904)	26,899	50,005	—	—
Payments on current portion of long-term debt	(1,200)	—	—	—	(1,200)
Payments on revolving long-term debt	(2,958,100)	—	—	—	(2,958,100)
Borrowings under revolving long-term debt	3,054,800	—	—	—	3,054,800
Other	(9,260)	—	—	—	(9,260)
Net cash provided by financing activities	9,336	26,899	50,005	—	86,240
Effect of exchange rate changes on cash	—	—	(323)	—	(323)
Increase in cash and cash equivalents	1,003	1,855	13	—	2,871
Cash and cash equivalents at beginning of year	7,378	5,776	30	—	13,184
Cash and cash equivalents at end of year	$          8,381	$          7,631	$               43	$                —	$        16,055
Year ended December 31, 2009:
Net cash provided by operating activities	$        58,212	$   1,198,995	$      102,169	$                —	$   1,359,376
Investing activities:
Capital investments	(17,075)	(1,517,990)	(245,100)	—	(1,780,165)
Proceeds from sale of property and equipment	—	763	55	—	818
Other	10,980	(29,238)	17,001	—	(1,257)
Net cash used in investing activities	(6,095)	(1,546,465)	(228,044)	—	(1,780,604)
Financing activities:
Intercompany activities	(478,843)	353,246	125,597	—	—
Payments on current portion of long-term debt	(61,200)	—	—	—	(61,200)
Payments on revolving long-term debt	(1,371,700)	—	—	—	(1,371,700)
Borrowings under revolving long-term debt	1,696,200	—	—	—	1,696,200
Other	(25,165)	—	—	—	(25,165)
Net cash provided by (used in) financing activities	(240,708)	353,246	125,597	—	238,135
Increase (decrease) in cash and cash equivalents	(188,591)	5,776	(278)	—	(183,093)
Cash and cash equivalents at beginning of year	195,969	—	308	—	196,277
Cash and cash equivalents at end of year	$          7,378	$          5,776	$               30	$                —	$        13,184

109 SWN

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. 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 ourdisclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (theExchange 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 ourdisclosure controls and procedures were effective as of December 31, 2011.  There were no changes in our internal control over financial reporting during the threemonths ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting is included on page 68 of this Form 10-K.

ITEM 9B. OTHER INFORMATION

There was no information required to be disclosed in a current report on Form 8-K during the fourth quarter of the fiscal year ended December 31, 2011, that was not reported on such form.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

EXECUTIVE OFFICERS OF THE REGISTRANT

Name	Officer Position	Age	Years Served as Officer
Steven L. Mueller	President and Chief Executive Officer	58	3
William J. Way	Executive Vice President & Chief Operating Officer	52	-
Greg D. Kerley	Executive Vice President and Chief Financial Officer	56	22
Mark K. Boling	Executive Vice President, General Counsel and Secretary	54	10
Gene A. Hammons1	President, Southwestern Midstream Services Company*	66	7

Mr. Mueller was appointed Chief Executive Officer in May 2009 and was subsequently elected to the Board of Directors in July 2009. Mr. Mueller joined us as President and Chief Operating Officer in June 2008.  He joined us from CDX Gas, LLC, where he was employed as Executive Vice President from September 2007 to May 2008. In December

^{_____________________________________}

¹ Mr. Hammons will be retiring from the Company after the first quarter of 2012.

*Position held with one or more subsidiaries of the Company

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2008, CDX Gas, LLC voluntarily filed for bankruptcy.  In 2009, CDX emerged from bankruptcy and resumed operations as Vitruvian Exploration LLC.  From 2001 until 2007, Mr. Mueller served first as the Senior Vice President and General Manager Onshore and later as the Executive Vice President and Chief Operating Officer of The Houston Exploration Company. A graduate of the Colorado School of Mines, Mr. Mueller has over 30 years of experience in the oil and natural gas industry and has served in multiple operational and managerial roles at Tenneco Oil Company, Fina Oil Company, American Exploration Company, Belco Oil & Gas Company and The Houston Exploration Company.  Mr. Mueller is the president of the Company’s subsidiaries, Southwestern Field Services, LLC, DeSoto Sand, LLC, SWN International, LLC, Southwestern NGV Services, LLC and A.W. Realty Company.  Mr. Mueller is also a director of the Company’s subsidiaries, SWN Resources Canada, Inc., Certified Title Company and A.W. Realty Company.

Mr. Way joined the Company in 2011 as Executive Vice President and Chief Operating Officer of the Southwestern Energy Company.  He is also Executive Vice President of the Company’s subsidiaries, Southwestern Energy Production Company, SEECO, Inc., Diamond “M” Production Company, DeSoto Drilling, Inc., Southwestern Field Services, LLC, DeSoto Sand, LLC, SWN International, LLC, Southwestern NGV Services, LLC and A.W. Realty Company. Mr. Way is also a director of the Company’s subsidiaries, SEECO, Inc., Southwestern Energy Production Company, DeSoto Drilling, Inc., Diamond “M” Production Company, Southwestern Midstream Services Company and Southwestern Energy Services Company.  Prior to joining the Company, he was Senior Vice President, Americas of BG Group plc with responsibility for E&P, Midstream and LNG operations in the United States, Trinidad and Tobago, Chile, Bolivia, Canada and Argentina.  He is a graduate of Texas A&M University with a degree in Industrial Engineering and has an MBA from The Massachusetts Institute of Technology.

Mr. Kerley was appointed to his present position in December 1999.  He was elected to the Board of Directors in August 2010.  Previously, he served as Senior Vice President and Chief Financial Officer from 1998 to 1999, Senior Vice President-Treasurer and Secretary from 1997 to 1998, Vice President-Treasurer and Secretary from 1992 to 1997, and Controller from 1990 to 1992.  Mr. Kerley also served as the Chief Accounting Officer from 1990 to 1998. Prior to joining us, Mr. Kerley held senior financial and accounting positions at Agate Petroleum, Inc. and was a manager for Arthur Andersen, L.L.P. specializing in the energy sector.  Mr. Kerley is the executive vice president of the Company’s subsidiaries, Southwestern Field Services, LLC, DeSoto Sand, LLC, SWN International, LLC, SWN Resources Canada, Inc., Southwestern NGV Services, LLC and A.W. Realty Company.  Mr. Kerley is also a director of the Company’s subsidiaries, SEECO, Inc., Southwestern Energy Production Company, DeSoto Drilling, Inc., Diamond “M” Production Company, SWN Resources Canada, Inc., Southwestern Midstream Services Company, Southwestern Energy Services Company, Certified Title Company and A.W. Realty Company.  

Mr. Boling was appointed to his present position in December 2002.  He joined us as Senior Vice President, General Counsel and Secretary in January 2002.  He is also the secretary of all of the Company’s subsidiaries and a director of the Company’s subsidiaries, SEECO, Inc., Southwestern Energy Production Company, DeSoto Drilling Inc., Southwestern Midstream Services Company, Southwestern Energy Services Company, Diamond “M” Production Company, A.W. Realty Company, Certified Title Company and SWN Resources Canada, Inc.  Prior to joining the company, Mr. Boling had a private law practice in Houston specializing in the natural gas and oil industry from 1993 to 2002.  Previously, Mr. Boling was a partner with Fulbright and Jaworski L.L.P. where he was employed from 1982 to 1993.

Mr. Hammons was appointed President of Southwestern Midstream Services Company, and its subsidiaries, Desoto Gathering Company, LLC, Angelina Gathering Company, LLC, Southwestern Energy Services Company in December 2005.  He joined the company in July 2005 as Vice President of Southwestern Midstream Services Company.  He is also President of SWN Producer Services, LLC and a director of Southwestern Midstream Services Company and Southwestern Energy Services Company.  Prior to joining us, he provided consulting services to clients in the natural gas industry.  Previously, Mr. Hammons was employed by El Paso Natural Gas Company and Burlington Resources and held managerial positions in facility design and installation, gathering management and marketing over the course of his combined 28-year tenure.

All executive officers are elected at the Annual Meeting of the Board of Directors for one-year terms or until their successors are duly elected.  There are no arrangements between any officer and any other person pursuant to which he was selected as an officer.  There is no family relationship between any of our executive officers or between any of them and our directors.

The definitive Proxy Statement to holders of our common stock in connection with the solicitation of proxies to be used in voting at the Annual Meeting of Stockholders to be held on or about May 22, 2012 (“2011 Proxy Statement”), is hereby incorporated by reference for the purpose of providing information about our directors, and for discussion of our audit committee and our audit committee financial expert. We refer you to the sections “Proposal No. 1: Election of Directors” and “Share Ownership of Management, Directors and Nominees” in the 2012 Proxy Statement for information

111 SWN

concerning our directors. We refer you to the section “Corporate Governance – Committees of the Board of Directors” in the 2012 Proxy Statement for discussion of our audit committee and our audit committee financial expert.  Information concerning our executive officers is presented in Part I of this Form 10-K. We refer you to the section “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2012 Proxy Statement for information relating to compliance with Section 16(a) of the Exchange Act.

The Company has adopted a code of ethics that applies to the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer.  The full text of such code of ethics has been posted on the Company’s website at www.swn.com, and is available free of charge in print to any stockholder who requests it.   Requests for copies should be addressed to the Secretary at 2350 N. Sam Houston Parkway East, Suite 125, Houston TX, 77032.

ITEM 11. EXECUTIVE COMPENSATION

The 2011 Proxy Statement is hereby incorporated by reference for the purpose of providing information about executive compensation, compensation committee interlocks and insider participation as well as the Compensation Committee Report. We refer you to the sections “Compensation Discussion & Analysis,” “Executive Compensation,” “Outside Director Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the 2012 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The 2012 Proxy Statement is hereby incorporated by reference for the purpose of providing information about securities authorized for issuance under our equity compensation plans and security ownership of certain beneficial owners and our management. For information about our equity compensation plans, refer to “Equity Compensation Plans” in our 2012 Proxy Statement. Refer to the sections “Security Ownership of Certain Beneficial Owners” and “Share Ownership of Management, Directors and Nominees” in our 2012 Proxy Statement for information about security ownership of certain beneficial owners and our management and directors.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The 2012 Proxy Statement is hereby incorporated by reference for the purpose of providing information about certain relationships, related transactions and board independence. Refer to the sections “Transactions with Related Persons,” “Share Ownership of Management, Directors and Nominees,” and “Compensation Discussion and Analysis” for information about transactions with our executive officers, directors or management and to “Corporate Governance – Director Independence” and “ – Committees of the Board of Directors” for information about director independence.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The 2012 Proxy Statement is hereby incorporated by reference for the purpose of providing information about fees paid to the principal accountant and the audit committee’s pre-approval policies and procedures. We refer you to the section “Relationship with Independent Registered Public Accounting Firm” in the 2012 Proxy Statement and to Exhibit A thereto for information concerning fees paid to our principal accountant and the audit committee’s pre-approval policies and procedures and other required information.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1)

The consolidated financial statements of Southwestern Energy Company and its subsidiaries and the report of independent registered public accounting firm are included in Item 8 of this Form 10-K.

(2) The consolidated financial statement schedules have been omitted because they are not required under the related instructions, or are not applicable.

(3)

 The exhibits listed on the accompanying Exhibit Index are filed as part of, or incorporated by reference into, this Form 10-K.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                                                                                                        SOUTHWESTERN ENERGY COMPANY

Dated: February 27, 2012

BY:

/s/ GREG D. KERLEY

                                                                                                                   Greg D. Kerley

                                                                                                                   Executive Vice President

                                                                                                                   and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 27, 2012.

/s/ HAROLD M. KORELL	Director, Chairman of the Board
Harold M. Korell
/s/ STEVEN L. MUELLER	Director, President and Chief Executive Officer
Steven L. Mueller
/s/ GREG D. KERLEY	Director, Executive Vice President and Chief Financial Officer
Greg D. Kerley
/s/ ROBERT C. OWEN	Controller and Chief Accounting Officer
Robert C. Owen
/s/ LEWIS E. EPLEY, JR	Director
Lewis E. Epley, Jr
/s/ ROBERT L. HOWARD	Director
Robert L. Howard
/s/ CATHERINE A. KEHR	Director
Catherine A. Kehr
/s/ VELLO A. KUUSKRAA	Director
Vello A. Kuuskraa
/s/ KENNETH R. MOURTON	Director
Kenneth R. Mourton
/s/ CHARLES E. SCHARLAU	Director
Charles E. Scharlau
/s/ ALAN H. STEVENS	Director
Alan H. Stevens

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EXHIBIT INDEX

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of Southwestern Energy Company. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 24, 2010)
3.2	Amended and Restated Bylaws of Southwestern Energy Company, effective February 23, 2012 (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed February 24, 2012).
4.1	Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K/A filed August 3, 2006)
4.2	Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, dated April 9, 2009. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 9, 2009)
4.3	Indenture, dated as of December 1, 1995 between Southwestern Energy Company and The First National Bank of Chicago, as trustee. (Incorporated by reference to Exhibit 4 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-3 (File No. 33-63895) filed on November 17, 1995)
4.4	First Supplemental Indenture between Southwestern Energy Company and J.P. Morgan Trust Company, N.A. (as successor to the First National Bank of Chicago) dated June 30, 2006. (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K/A filed August 3, 2006)
4.5	Second Supplemental Indenture by and among Southwestern Energy Company, SEECO, Inc., Southwestern Energy Production Company, Southwestern Energy Services Company and The Bank of New York Trust Company, N.A., as trustee (as successor to J.P. Morgan Trust Company, N.A.), dated as of May 2, 2008. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K/A filed on May 8, 2008)
4.6	Indenture dated June 1, 1998 by and among NOARK Pipeline Finance, L.L.C. and The Bank of New York. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed May 4, 2006)
4.7	First Supplemental Indenture dated May 2, 2006 by and among Southwestern Energy Company, NOARK Pipeline Finance, L.L.C., and UMB Bank, N.A., as trustee (as successor to the Bank of New York). (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed May 4, 2006)
4.8	Second Supplemental Indenture between Southwestern Energy Company and UMB Bank, N.A., as trustee, dated June 30, 2006. (Incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K/A filed August 3, 2006)
4.9	Third Supplemental Indenture by and among Southwestern Energy Company, SEECO, Inc., Southwestern Energy Production Company, Southwestern Energy Services Company and UMB Bank, N.A., as trustee, dated as of May 2, 2008. (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K/A filed on May 8, 2008)
4.10	Guaranty dated June 1, 1998 by Southwestern Energy Company in favor of The Bank of New York, as trustee, under the Indenture dated as of June 1, 1998 between NOARK Pipeline Finance L.L.C. and such trustee. (Incorporated by reference to Exhibit 4.6 to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 2005)
4.11	Indenture dated January 16, 2008 among Southwestern Energy Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed January 16, 2008)

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4.12	Policy on Confidential Voting of Southwestern Energy Company. (Incorporated by reference to the Appendix of the Registrant’s Definitive Proxy Statement (Commission File No. 1-08246) for the 2006 Annual Meeting of Stockholders)
4.13	Third Amended and Restated Credit Agreement dated February 14, 2011 among Southwestern Energy Company, JPMorgan Chase Bank, NA, Bank of America, N.A., Wells Fargo N.A., The Royal Bank of Scotland PLC, Citigroup, N.A. and the other lenders named therein, JPMorgan Chase Bank, NA, as administrative agent. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed February 18, 2011)
10.1	Form of Second Amended and Restated Indemnity Agreement between Southwestern Energy Company and each Executive Officer and Director of the Registrant. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A filed August 3, 2006)
10.2	Form of Executive Severance Agreement between Southwestern Energy Company and each of the Executive Officers of Southwestern Energy Company, effective February 17, 1999. (Incorporated by reference to Exhibit 10.12 of the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 1998)
10.3	Form of Amendment to Executive Severance Agreement between Southwestern Energy Company and each of the Executive Officers of Southwestern Energy Company prior to 2011. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 2008)
10.4*	Form of Executive Severance Agreement between Southwestern Energy Company and Executive Officers Post 2011.
10.5	Southwestern Energy Company Incentive Compensation Plan. (Incorporated by reference to Exhibit 10.2(b) to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 1998)
10.6	Amendment to Southwestern Energy Company Incentive Compensation Plan. (Incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 2008)
10.7	Second Amendment to Southwestern Energy Company Incentive Compensation Plan (Incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 2009)
10.8	Southwestern Energy Company Supplemental Retirement Plan as amended. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 19, 2008)
10.9	Southwestern Energy Company Non-Qualified Retirement Plan as amended. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 19, 2008)
10.10	Amendment One to the Southwestern Energy Company Non-Qualified Retirement Plan (Incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 2009)
10.11	Southwestern Energy Company 2000 Stock Incentive Plan dated February 18, 2000. (Incorporated by reference to the Appendix of the Registrant’s Definitive Proxy Statement (Commission File No. 1-08246) for the 2000 Annual Meeting of Stockholders)
10.12	Southwestern Energy Company 2002 Employee Stock Incentive Plan, effective October 23, 2002.  (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 13, 2005)

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10.13*	Southwestern Energy Company 2002 Performance Unit Plan, as amended, effective December 8, 2011.
10.14	Southwestern Energy Company 2004 Stock Incentive Plan. (Incorporated by reference to Appendix A to the Registrant’s Proxy Statement dated March 29, 2004)
10.15	Form of Incentive Stock Option Agreement for awards prior to December 8, 2005. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 20, 2004)
10.16	Form of Non-Qualified Stock Option Agreement for non-employee directors for awards prior to December 8, 2005. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on December 20, 2004)
10.17	Form of Incentive Stock Option for awards granted on or after December 8, 2005. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on December 13, 2005)
10.18	Form of Restricted Stock Agreement for awards granted on or after December 8, 2005. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on December 13, 2005)
10.19	Form of Non-Qualified Stock Option Agreement for awards granted on or after December 8, 2005 and through December 8, 2011 (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on December 13, 2005)
10.20*	Form of Non-Qualified Stock Option Agreement for awards granted on or after December 8, 2011.
10.21	Master Lease Agreement by and between Southwestern Energy Company and SunTrust Leasing Corporation dated December 29, 2006. (Incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 2006)
10.22	Guaranty by and between Southwestern Energy Company and Texas Gas Transmission, LLC, dated as of October 27, 2008. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (Commission File No. 1-08246) for the period ended September 30, 2008)
10.23	Guaranty by and between Southwestern Energy Company and Fayetteville Express Pipeline, LLC dated September 30, 2008 (Incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K (Commission File No. 1-08246) for the year ended December 31, 2008)
10.24	Retirement Letter Agreement dated February 24, 2012 between Southwestern Energy Company and Gene A. Hammons.  (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed February 27, 2012)
10.25	Retirement Agreement dated August 11, 2009 between Southwestern Energy Company and Harold M. Korell. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 14, 2009)
21.1*	List of Subsidiaries.
23.1*	Consent of PricewaterhouseCoopers LLP.
23.2*	Consent of Netherland, Sewell & Associates, Inc.
31.1*	Certification of CEO filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of CFO filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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32*	Certification of CEO and CFO furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95.1*	Mine Safety Disclosure.
99.1*	Reserve Audit Report of Netherland, Sewell & Associates, Inc., dated January 30, 2012.
101.INS*	Interactive Data File Instance Document
101.SCH*	Interactive Data File Schema Document
101.CAL*	Interactive Data File Calculation Linkbase Document
101.LAB*	Interactive Data File Label Linkbase Document
101.PRE*	Interactive Data File Presentation Linkbase Document
101.DEF*	Interactive Data File Definition Linkbase Document

_____________

*Filed herewith

117 SWN

EX-10

Exhibit 10.4

EXECUTIVE SEVERANCE AGREEMENT

This agreement (this “Agreement”) is made as of the ___ day of _____, 20__, between Southwestern Energy Company, a Delaware corporation with its principal offices at 2350 N. Sam Houston Parkway East, Suite 125, Houston, TX 77032 (hereinafter called the “Company”), and ________________ (hereinafter called the “Employee”).

WITNESSETH THAT:

WHEREAS, should the Company or shareholders of the Company receive any proposal from a third person concerning a possible business combination with the Company or an acquisition of equity securities of the Company, the Board of Directors of the Company (hereinafter called the “Board”) believes it imperative that the Company and the Board be able to rely upon the Employee to continue in his position, and that the Company and the Board be able to receive and rely upon his advice, if they request it, as to the best interests of the Company and its shareholders, without concern that he might be distracted or that his advice might be affected by the personal uncertainties and risks created by such a proposal;

WHEREAS, the Company desires to provide the compensation and benefits provided for herein in order to enable it to attract and retain qualified executives such as the Employee, without a current expense to the Company;

NOW, THEREFORE, to assure the Company that it will have the continued dedication of the Employee and the availability of his advice and counsel notwithstanding the possibility, threat or occurrence of a bid to take over control of the Company and to induce the Employee to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Employee hereby agree as follows:

1.

Definitions.

(i)

“Cause”^, when used in connection with the termination of the Employee’s employment by the Company, shall mean (a) the willful and continued failure by the Employee substantially to perform his duties and obligations to the Company (other than any such failure resulting from his Disability) which failure continues after the Company has given notice thereof to the Employee or (b) the willful engaging by the Employee in misconduct which is materially injurious to the Company.  For purposes of this definition, no act, or failure to act, on the Employee’s part shall be considered “willful” unless done, or omitted to be done, by the Employee in bad faith and without reasonable belief that his action or omission was in the best interests of the Company.

(ii)

“Change in Control” shall mean the occurrence of any of the following:

(a)

any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), an “Acquiring Person”) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities, provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any corporation with respect to which, immediately following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power

of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, in the aggregate by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and Company voting securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the outstanding Company common stock and Company voting securities, as the case may be, shall not constitute a Change in Control;

(b)

consummation by the Company of a reorganization, merger or consolidation (a “Business Combination”), in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the outstanding Company common stock and Company voting securities immediately prior to such Business Combination do not in the aggregate, immediately following such Business Combination, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the outstanding Company common stock and Company voting securities, as the case may be;

(c)

any individual who is nominated by the Board for election to the Board on any date fails to be so elected as a direct or indirect result of any proxy fight or contested election for positions on the Board;

(d)

a “change in control” of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act occurs;

(e)

(i) a complete liquidation or dissolution of the Company;

(ii) the sale or other disposition of all or substantially all the assets of the Exploration and Production business segment other than to a corporation with respect to which, immediately following such sale or disposition, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, in the aggregate by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and Company voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and Company voting securities, as the case may be, immediately prior to such sale or disposition; or

(f)

a majority of the Board determines in its sole and absolute discretion that there has been a Change in Control of the Company or that there will be a Change in Control of the Company upon the occurrence of certain specified events and such events occur.

Notwithstanding the foregoing, a Change in Control shall not occur with respect to the Employee by reason of any event which would otherwise constitute a Change in Control if, immediately after the occurrence of such event, individuals including such Employee who were executive officers of the Company immediately prior to the occurrence of such event, own, directly or indirectly, on a fully diluted basis, (i) 15% or more of the then outstanding shares of common stock of the Company or any acquiror or successor to substantially all of the business of the Company or, in the case of an event described in Section 1(ii)(f) relating to a sale of a business segment, the entity acquiring the business segment or (ii) 15% or more of the combined voting power of the then outstanding voting securities of the Company or any acquiror or successor to substantially all of the business of the Company or, in the case of an event described in Section 1(ii)(f) relating to a sale of a business segment, the entity acquiring the business segment entitled to vote generally in the election of directors.  For greater clarity, it is understood and agreed that a “Change in Control” pursuant to Section 1(ii)(f) is contingent upon the actual occurrence of a “Change in Control”, including as a result of the specified events.

(iii)

“Committee” shall mean the Compensation Committee of the Board.

(iv)

“Compensation” shall mean the sum of the highest annual base salary of the Employee in effect at any time during the year preceding the Termination Date and the maximum cash bonus opportunity available to the Employee under the Company’s Incentive Compensation Plan(s) at any time during the year prior to the Termination Date.

(v)

“Contract Period” shall mean the period defined in Section 2 hereof.

(vi)

“Disability” shall mean a physical or mental incapacity of the Employee which entitles the Employee to compensation and benefits at least equal to two-thirds of his base

salary during the period of such incapacity under any long term disability plan applicable to him and maintained by the Company as in effect immediately prior to a Change in Control.

(vii)

“Good Reason,” when used with reference to a termination by the Employee of his employment with the Company, shall mean:

(a)

the assignment to the Employee of any duties inconsistent with, or the reduction of powers or functions associated with, his positions, duties, responsibilities and status with the Company immediately prior to a Change in Control, or any removal of the Employee from, or any failure to reelect the Employee to, any positions or offices the Employee held immediately prior to a Change in Control, except in connection with the termination of the Employee’s employment by the Company for Cause or on account of Disability pursuant to the requirements of this Agreement;

(b)

a reduction by the Company of the Employee’s base salary as in effect immediately prior to a Change in Control, except in connection with the termination of the Employee’s employment by the Company for Cause or on account of Disability pursuant to the requirements of this Agreement;

(c)

a change in the Employee’s principal work location to a location more than forty (40) miles from the Employee’s principal work location immediately prior to a change in control, except for required travel on the Company’s business to an extent substantially consistent with the Employee’s business travel obligations immediately prior to a Change in Control;

(d)

(1)  the failure by the Company to continue in effect any employee benefit plan, program or arrangement (including without limitation, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974 and any incentive or equity-based plans) in which the Employee was participating immediately prior to a Change in Control (or substitute plans, programs or arrangements providing the Employee with substantially similar compensation and benefits), (2) the taking of any action, or the failure to take any action, by the Company which could (A) adversely affect the Employee’s participation in, or materially reduce the Employee’s benefits under, any of such plans, programs or arrangements, (B) materially adversely affect the basis for computing benefits under any of such plans, programs or arrangements or (C) deprive the Employee of any material fringe benefit enjoyed by the Employee immediately prior to a Change in Control or (3) the failure by the Company to provide the Employee with the number of paid vacation days to which the Employee was entitled immediately prior to a Change in Control in accordance with the Company’s vacation policy applicable to the Employee then in effect, except  in each case, in connection with the termination of the Employee’s employment by the Company for Cause or on account of Disability pursuant to the requirements of this Agreement;

(e)

the failure by the Company to pay the Employee any portion of the Employee’s current compensation, or any portion of the Employee’s compensation deferred under any plan, agreement or arrangement of or with the Company, within seven (7) days of the date such compensation is due;

(f)

a material increase in the required working hours of the Employee from that required prior to a Change in Control;

(g)

the failure by the Company to obtain an assumption of the obligations of the Company under this Agreement by any successor to the Company pursuant to Section 8(i) hereof; or

(h)

any termination of the Employee’s employment by the Company during the Contract Period which is not effected pursuant to the requirements of this Agreement.

(viii)

“Termination Date” shall mean the effective date as provided hereunder of the termination of the Employee’s employment.

2.

Application of Agreement.  This Agreement shall apply only to a termination of employment of the Employee during a period (the “Contract Period”) commencing on the date immediately preceding the date of a Change in Control and terminating on the third anniversary of the date of the Change in Control; provided, however, that such Change in Control occurs during the period commencing as of the date hereof and terminating on the first anniversary of the date hereof or as further extended pursuant to the following sentence.  On the first anniversary of the date hereof, and on each anniversary of the date hereof thereafter, the period during which this Agreement shall apply shall automatically be extended for one additional year, unless at least six months before such anniversary the Company notifies the Employee that it elects not to extend such period.  If the Company elects not to extend such period, then such period shall end two years after the next anniversary of the date hereof that follows the date of such notice.  Notwithstanding anything in this Agreement to the contrary, if, within six months prior to the date on which a Change in Control occurs, the Employee’s

employment with the Company is terminated by the Company other than by reason of the Employee’s death, Disability or circumstances that would constitute Cause or the terms and conditions of the Employee’s employment are adversely changed in a manner which would constitute grounds for a termination of employment by the Employee for Good Reason, and it is reasonably demonstrated that such termination of employment or adverse change (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change in Control of (ii) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Agreement such termination of employment shall be deemed to have occurred during the Contract Period and shall be considered either termination of the Employee’s employment without Cause by the Company or termination of the Employee’s employment by the Employee for Good Reason, as the case may be.  Any reference herein to the Employee’s employment or termination of employment by or with the Company shall include the Employee’s employment or termination of employment by or with any subsidiary or affiliated company of the Company.

3.

Termination of Employment of the Employee By the Company During the Contract Period.

(i)

During the Contract Period, the Company shall have the right to terminate the Employee’s employment hereunder for Cause, for Disability or without Cause by following the procedures hereinafter specified.

(ii)

Termination of the Employee’s employment for Disability shall become effective thirty (30) days after a notice of intent to terminate the Employee’s employment,

specifying Disability as the basis for such termination, is given to the Employee by the Committee.

(iii)

The Employee may not be terminated for Cause unless and until a notice of intent to terminate the Employee’s employment for Cause, specifying the particulars of the conduct of the Employee forming the basis for such termination, is given to the Employee by the Committee and, subsequently, a majority of the Board finds, after reasonable notice to the Employee (but in no event less than fifteen (15) days’ prior notice) and an opportunity for the Employee and his counsel to be heard by the Board, that termination of the Employee’s employment for Cause is justified.  Termination of the Employee’s employment for Cause shall become effective after such finding has been made by the Board and five (5) business days after the Board gives to the Employee notice thereof, specifying in detail the particulars of the conduct of the Employee found by the Board to justify such termination for Cause.

(iv)

The Company shall have the absolute right to terminate the Employee’s employment without Cause at any time during the Contract Period by vote of a majority of the Board.  Termination of the Employee’s employment without Cause shall be effective five (5) business days after the Board gives to the Employee notice thereof, specifying that such termination is without Cause.

(v)

Upon a termination of the Employee’s employment for Cause during the Contract Period, the Employee shall have no right to receive any compensation or benefits hereunder (other than those compensation and benefits provided in Paragraph (i) (a) of Section 5 hereof).  Upon a termination of the Employee’s employment without Cause or for Disability during the Contract Period, the Employee shall be entitled to receive the compensation and

benefits provided in Section 5 hereof.  Except as provided in Section 2, this Agreement shall not apply to, and the Employee shall have no right to receive any compensation or benefits hereunder in connection with any termination of the Employee’s employment by the Company other than during the Contract Period.

4.

Termination of Employment By the Employee During the Contract Period.  During the Contract Period, the Employee shall be entitled to terminate his employment with the Company, and shall be entitled to the compensation and benefits hereunder as follows.  

(i)

If the Employee terminates his employment with the Company during the twelve-month period beginning immediately preceding the date of a Change in Control other than for Good Reason, the Employee shall have no right to receive any compensation or benefits hereunder (other than those provided in Paragraph (i) (a) of Section 5 hereof).  

(ii)

If the Employee shall terminate his employment with the Company at any time during the Contract Period for Good Reason, the Employee shall be entitled to receive the benefits provided in Section 5 hereof.

(iii)

The Employee shall give the Company notice of voluntary termination of employment pursuant to this Section 4, which notice need specify only the Employee’s desire to terminate his employment and, if such termination is for Good Reason, set forth in reasonable detail the facts and circumstances claimed by the Employee to constitute Good Reason.  Termination of the Employee’s employment by the Employee pursuant to this Section 4 shall be effective five (5) business days after the Employee gives notice thereof to the Company.  Except as provided in Section 2, this Agreement shall not apply to, and the Employee shall have no right to receive, any compensation or benefits hereunder in connection with any termination of the

Employee’s employment by the Employee other than during the Contract Period.  This Agreement shall not apply to, and the Employee shall have no right to receive, any compensation or benefits hereunder in connection with a termination of the Employee’s employment on account of the Employee’s death, whether or not during the Contract Period.

5.

Compensation and Benefits Upon Termination in Certain Circumstances.  (i)  Upon the termination of the employment of the Employee by the Company pursuant to 3(iv) (termination without Cause) hereto or by the Employee as described in Section 4(ii) hereof, the Employee shall be entitled to receive the compensation and benefits in Subparagraphs (a) and (b) of this Paragraph (i).  Upon the termination of the employment of the Employee by the Company pursuant to Section 3(ii) (termination by reason of Disability) or Section 3(iii) (termination for Cause) or by the Employee pursuant to Section 4(i), the Employee shall be entitled to the compensation and benefits in Subparagraph (a) of this Paragraph (i).

(a)

The Company shall pay to the Employee, not later than the Termination Date, a lump sum cash amount equal to the sum of (I) the full base salary earned by the Employee through the Termination Date and unpaid at the Termination Date, calculated at the highest rate of base salary in effect at any time during the twelve months immediately preceding the Termination Date, (II) the amount of any base salary attributable to vacation earned by the Employee but not taken before the Termination Date, (III) any annualized bonus accrued to the Employee through the Termination Date and unpaid at the Termination Date, plus (IV) all other amounts earned by the Employee and unpaid at the Termination Date.

(b)

The Company shall pay to the Employee, not later than the Termination Date, a lump sum cash amount equal to the product of the Employee’s Compensation times ____.

(ii)

If the Employee’s employment is terminated by the Company pursuant to Section 3(ii) (termination by reason of Disability) or 3(iv) (termination without Cause) hereof, or by the Employee pursuant to Section 4(ii) hereof, the Employee shall be entitled to receive the following compensation and benefits:

(a)

The Company shall maintain in full force and effect for the Employee’s continued benefit all life, medical, dental, prescription drug and long- and short-term disability plans, programs or arrangements, whether group or individual, in which the Employee was entitled to participate at any time during the twelve 12 month-period prior to the Termination Date, until the earliest to occur of (I) three years after the Termination Date; (II) the Employee’s death (provided that compensation and benefits payable to his beneficiaries shall not terminate upon his death); or (III) with respect to any particular plan, program or arrangement, the date he is afforded a comparable benefit at a comparable cost to the Employee by a subsequent employer.  In the event that the Employee’s participation in any such plan, program or arrangement of the Company is prohibited the Company shall arrange to provide the Employee with compensation and benefits substantially similar to those which the Employee is entitled to receive under such plan, program or arrangement for such period.

(b)

The Company shall pay to the Employee all legal fees and expenses (including legal fees and expenses incurred in connection with an arbitration proceeding

engaged in pursuant to Section 10 hereof) incurred by the Employee as a result of such termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided to the Employee by this Agreement or under any other plan, program or arrangement of the Company or agreement with the Company), as and when such fees and expenses become due.

(iii)

The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Section 5 by seeking other employment or otherwise.

(iv)

The amount of any payment or benefit provided for in this Section 5 shall not be reduced by any compensation, benefits or other amounts paid to or earned by the Employee as the result of employment with another employer after the Termination Date or otherwise, except as specifically provided in Section 5(ii)(a)(III).

(v)

In the event that any payment hereunder, together with any other payment or the value of any benefit received in connection with a Change in Control or the termination or the Employee’s employment pursuant to this Agreement or any plan, agreement or other arrangement between the Company and the Employee (or any member of Company’s affiliated group (“Affiliated Group”) as such term is defined in Section 1504 of the Internal Revenue Code of 1986, as amended (the “Code”), without regard to Section 1504(b) thereof) (“Change in Control Payments”) would result in the imposition of an excise tax (“Excise Tax”) under Section 4999 of the Code, the payment hereunder may, at the election of the Employee, be reduced by the amount necessary to prevent the imposition of such excise tax  (the “Payment Reduction”).

(a)

All  determinations required to be made under this Paragraph (v), including whether a Payment Reduction is required to avoid the taxes described in the preceding paragraph, the amount of any such Payment Reduction, and the assumptions to be used in determining such conclusions, shall be made by the Company’s certified public accountants (the “Accountants”) which shall provide detailed supporting calculations both to the Company and the Employee within fifteen days of the Termination Date, if applicable.  All fees and expenses of the Accountants shall be borne solely by the Company.  Within five (5) days after receipt of such supporting detail, the Employee may, by filing a written notice with the Company, elect a Payment Reduction.  The Payment Reduction, if any, shall then be made by the Company within five days of the receipt of the Employee’s election.  If the Accountants determine that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on Employee’s applicable U.S. Federal income tax return for the applicable year would not result in the imposition of a negligence or similar penalty.  Any determination by the Accountants shall be binding on both the Employee and the Company.

(b)

If it is determined that the Payment Reductions which were not made by the Company should have been made (“Overpayment”), or, if such Payment Reductions which were made should not have been made (“Underpayment”), (I) the Company shall, in the case of any such Underpayment, make a further payment to Employee, within thirty days notice of such Underpayment, in the amount of such Underpayment, including interest accrued with respect thereto, provided however, such further payment shall not

include any such amounts (including such interest) that would result, either alone, or in combination with any Change in Control Payment in any Excise Tax after giving effect to such payment by the Company to the Employee on account of such Underpayment, or (II) in the case of an Overpayment, then Employee shall pay an amount equal to such Overpayment, including any interest accrued with respect thereto, such that the net effect, after such payment of such Overpayment (including interest) from Employee to the Company would be that no Excise Tax would be imposed on the Employee.  For purposes of this Paragraph (v), the Accountants shall determine the amount of such Overpayment or Underpayment.

6.

Payment Obligations Absolute.  The Company’s obligation to pay the Employee the amounts provided for hereunder shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else and, including without limitation, any defense or claim based on a breach by the Employee of the covenants contained herein.  All amounts payable by the Company hereunder shall be paid without notice or demand.  Except as expressly provided herein, the Company waives all rights which it may now have or may hereafter have conferred upon it, by statute or otherwise, to amend, terminate, cancel or rescind this Agreement in whole or in part.  Subject to the right of the Company to seek arbitration under Section 10 hereof and recover any payment made hereunder, each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Employee or from whomsoever may be entitled thereto, for any reason whatsoever.

7.

Covenant Not to Solicit.

(i)

In the event the Employee’s employment is terminated by the Company pursuant to Section 3(iv) hereof (termination without Cause) or by the Employee pursuant to Section 4 hereof, the Employee agrees during the three-year period following the Termination Date not to:

(a)

offer employment to any officer or employee of the Company or any subsidiary or affiliated company of the Company or attempt to induce any such officer or employee to leave the employ of the Company or any subsidiary or affiliated company of the Company; or

(b)

attempt to persuade or induce, or persuade or induce, any officer, director, agent, customer, client or supplier of the Company or any subsidiary or affiliated company of the Company to discontinue his or her relationship with the Company or any subsidiary or affiliated company of the Company.

(ii)

In the event of any breach of the foregoing covenant, the Employee acknowledges that the Company’s remedy at law is inadequate and that the Company shall be entitled to seek injunctive relief.

8.

Successors; Binding Agreement.

(i)

This Agreement shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the business and/or assets of the Company.  Additionally, the Company shall require any such successor expressly to agree to assume and to assume all of the obligations of the Company

under this Agreement upon or prior to such succession taking place.  A copy of such assumption and agreement shall be delivered to the Employee promptly after its execution by the successor.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall constitute “Good Reason.”  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and or assets as aforesaid, whether or not such successor executes and delivers the agreement provided for in this Section 8(i).

(ii)

This Agreement is personal to the Employee and the Employee may not assign or transfer any part of his rights or duties hereunder, or any compensation due to him hereunder, to any other person, except that this Agreement shall inure to the benefit of and be enforceable by the Employee’s personal or legal representatives, executors, administrators, heirs, distributees, devises, legatees or beneficiaries.  No payment pursuant to any will or the laws of descent and distribution shall be made hereunder unless the Company shall have been furnished with a copy of such will and/or such other evidence as the Board may deem necessary to establish the validity of the payment.

9.

Modification; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Employee and such director or officer as may be specifically designated by the Board.  Waiver by any party of any breach of or failure to comply with any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or a waiver of any other breach of, or failure to comply with, any other provision of this Agreement.

10.

Arbitration of Disputes.

(i)

Any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation or validity hereof shall be settled exclusively and finally by arbitration except that in the event of the Employee’s breach of the covenant contained in Section 7 hereof, the Company shall be entitled to seek injunctive relief pursuant to Section 7(ii) hereof.  It is specifically understood and agreed that any disagreement, dispute or controversy which cannot be resolved between the parties, including without limitation any matter relating to the interpretation of this Agreement, may be submitted to arbitration irrespective of the magnitude thereof, the amount in controversy or whether such disagreement, dispute or controversy otherwise would be considered justiciable or ripe for resolution by a court or arbitral tribunal.

(ii)

The arbitration shall be conducted in accordance with the Commercial Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”).

(iii)

The arbitral tribunal shall consist of one arbitrator.  The parties to the arbitration jointly shall directly appoint such arbitrator within 30 days of initiation of the arbitration.  If the parties shall fail to appoint such arbitrator as provided above, such arbitrator shall be appointed by the AAA as provided in the Arbitration Rules and shall be a person who (a) maintains his principal place of business within 30 miles of the City of Houston, Texas, and (b) has had substantial experience (whether practical or academic) in mergers and acquisitions or, if no such person is available, in employee compensation and benefits.  The Company shall pay all of the fees, if any, and expenses of such arbitrator.

(iv)

The arbitration shall be conducted within 30 miles of the City of Houston, Texas, or in such other city in the United States of America as the parties to the dispute may designate by mutual written consent.

(v)

At any oral hearing of evidence in connection with the arbitration, each party thereto or its legal counsel shall have the right to examine its witnesses and to cross-examine the witnesses of any opposing party.  No evidence of any witness shall be presented unless the opposing party or parties shall have the opportunity to cross-examine such witness, except as the parties to the dispute otherwise agree in writing or except under extraordinary circumstances where the interests of justice require a different procedure.

(vi)

Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding.  The parties hereto hereby waive, to the extent permitted by law, any rights to appeal or to seek review of such award by any court or tribunal.  The parties hereto agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitral award may be entered in any court having jurisdiction.

(vii)

Nothing herein contained shall be deemed to give the arbitral tribunal any authority, power, or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Agreement.

11.

Notice.  All notices, requests, demands and other communications required or permitted to be given by either party to the other party by this Agreement (including, without limitation, any notice of termination of employment and any notice under the Arbitration Rules of an intention to arbitrate) shall be in writing and shall be deemed to have been duly given

when delivered personally or received by certified or registered mail, return receipt requested, postage prepaid, at the address of the other party, as follows:

If to the Company, to:

Southwestern Energy Company

2350 N. Sam Houston Parkway E., Suite 125
Houston, Texas  77032
Attention:  Board of Directors and Secretary

If to the Employee, to:

[                                   ]

2350 N. Sam Houston Pkwy. E., Suite 125

Houston, Texas  77032

Either party hereto may change its address for purposes of this Section 11 by giving fifteen (15) days’ prior notice to the other party hereto.

12.

Severability.  If any term or provision of this Agreement or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

13.

Headings.  The headings in this Agreement are inserted for convenience of reference only and shall not be a part of or control or affect the meaning of this Agreement.

14.

Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed an original.

15.

Governing Law.  This Agreement has been executed and delivered in the State of Delaware and shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of Delaware.

16.

Payroll and Withholding Taxes.  The Company may withhold from any amounts payable to the Employee hereunder all federal, state, city or other taxes that the Company may reasonably determine are required to be withheld pursuant to any applicable law or regulation, provided however, that the Company’s determinations respecting matters described in Paragraph 5(v) shall be based upon and shall be consistent with the determinations by the Accountants.

17.

Entire Agreement.  Except as explicitly provided for herein, this Agreement supersedes any and all other oral or written agreements heretofore made relating to the subject matter hereof between the Company and the Employee, and constitutes the entire agreement of the parties relating to the subject matter hereof; provided, that, this Agreement shall not supersede or limit or in any way affect the amount of compensation or benefits to which the Employee would be entitled under any other agreement, plan, program or arrangement with the Company including any such agreement, plan, program or arrangement providing for compensation and benefits in the nature of severance pay.

18.

Application of Section 409A of the Code.

(a)

General.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code, so as to prevent inclusion in gross income of any amounts payable or benefits provided hereunder in a taxable year that is prior to the taxable year or years in which such amounts or benefits would otherwise actually be

distributed, provided or otherwise made available to the Employee.  This Agreement shall be construed, administered, and governed in a manner consistent with this intent and the following provisions of this paragraph shall control over any contrary provisions of this Agreement.  

(b)

Restrictions on Specified Employees.  If the Company determines that the Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code and delayed payment of any amount or commencement of any benefit under this Agreement is required to avoid a prohibited distribution under Section 409A(a)(2) of the Code, then, to such extent as required, deferred compensation payable hereunder in connection with the Employee’s termination of employment will be delayed and paid, with interest at the short term applicable federal rate as in effect as of the termination date, in a single lump sum six months and one day thereafter (or if earlier, the date of the Employee’s death).  The Committee shall determine whether the Employee is a “specified employee” based on the procedures adopted by the Company in writing, which procedures shall comply with the applicable limitations under Section 409A of the Code, and the rules prescribed in Treasury Regulation §1.409A-1(i).

(c)

Separation from Service.  Amounts payable hereunder upon the Employee’s termination or severance of employment with the Company that constitute deferred compensation under Section 409A of the Code shall not be paid prior to the Employee’s “separation from service” within the meaning of Section 409A of the Code.

(d)

Installments.  For purposes of Section 409A of the Code, any right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments so that each payment is designated as a separate payment for purposes of Section 409A of the Code.

(e)

Reimbursements.  All reimbursements and in-kind benefits provided under this Agreement which constitute a payment of nonqualified deferred compensation under Section 409A of the Code, including any payments provided under Section 5 and, shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirements that:

(i)

any reimbursement is for expenses incurred during an extended period of time following termination of employment;

(ii)

the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;

(iii)

the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred; and

(iv)

the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

(f)

References to Section 409A.  References in this Agreement to Section 409A of the Code include both that section of the Code itself and any guidance promulgated thereunder.

(g)

Application of Section 409A.  The Company makes no representation or warranty and shall have no liability to the Employee or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such section.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Southwestern Energy Company

By:___________________________

Chairman of the Compensation Committee
Southwestern Energy Company

By:___________________________

President and Chief Executive Officer
Southwestern Energy Company

_______________________________

EX-10

Exhibit 10.13

SOUTHWESTERN ENERGY COMPANY

2002 PERFORMANCE UNIT PLAN

(As Amended December 7, 2005, December 11, 2008 and December 8, 2011)

1.  Purpose of the Plan

This Southwestern Energy Company 2002 Performance Unit Plan is intended to promote the interests of the Company and its shareholders by providing the employees of the Company who are largely responsible for the management, growth and protection of the business of the Company, with incentives and rewards for their contribution to the increase in the value of the Company and to encourage them to continue in the service of the Company.

2.  Definitions

Whenever used herein, the masculine pronoun shall be deemed to include the feminine, the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used herein with the meaning thereafter ascribed:

(a)

“Account” shall mean a bookkeeping account on the Company’s books established pursuant to Section 5(b) of this Plan.  The Account shall initially reflect the number of Performance Units granted to a Participant pursuant to Section 5(a) of this Plan.

(b)

“Board of Directors” shall mean the Board of Directors of Southwestern.

(c)

"Cause", when used in connection with the termination of a Participant's employment with the Company, shall mean the termination of the Participant's employment by the Company on account of:

(i)

the willful and continued failure by the Participant to substantially perform his duties and obligations (other than any such failure resulting from his incapacity due to physical or mental illness), after a written demand for substantial performance has been delivered to the Participant by the Company or by the Participant's supervisor, which demand identifies in reasonable detail the manner in which the Participant is believed to have not substantially performed his or her duties;

(ii)

the Participant's willful and serious misconduct which has resulted in or could reasonably be expected to result in material injury to the business, financial condition or reputation of the Company;

(iii)

the Participant's conviction of, or entering of a plea of nolo contendere to, a crime that constitutes a felony or serious misdemeanor; or

(iv)

the breach by the Participant of any written covenant or agreement with the Company not to disclose any information pertaining to the Company or not to compete or interfere with the Company.

(d)

"Change in Control" shall mean the occurrence of any of the following:

(i)

any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange  Act of 1934 (the "Exchange Act"), an "Acquiring Person") becomes the "beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Southwestern representing 20% or more of the combined voting power of Southwestern's then outstanding securities, provided, however, that any acquisition by:

(A)

Southwestern or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by Southwestern or any of its subsidiaries; or

(B)

any corporation with respect to which, immediately following such acquisition, more than 60% of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, in the aggregate by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Southwestern Common Stock and Southwestern voting securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the outstanding Southwestern Common Stock and Southwestern voting securities, as the case may be, shall not constitute a Change in Control;  

(ii)

consummation by Southwestern of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were their respective beneficial owners of the outstanding Southwestern Common Stock and Southwestern voting securities immediately prior to such Business Combination do not in the aggregate, immediately following such Business Combination, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the outstanding Southwestern Common Stock and Southwestern voting securities, as the case may be;

(iii)

any individual who is nominated by the Board of Directors for election to the Board of Directors on any date fails to be so elected as a direct or indirect result of any proxy fight or contested election for positions on the Board of Directors;

(iv)

a "change in control" of Southwestern of a nature that would be required  to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act occurs;

(v)

(A)

a complete liquidation or dissolution of Southwestern, or

(B)

a sale or other disposition  of all or substantially all of the assets of both the Exploration and Production and the Utility  business segments of Southwestern other than to a corporation with respect to which,  immediately following such sale or disposition, more than 80% of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding  voting securities entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, in the aggregate by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Southwestern Common Stock and Southwestern voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Southwestern Common Stock and Southwestern voting securities, as the case may be, immediately prior to such sale or disposition;

(vi)

other than with respect to a person who is employed in the Utility business segment of Southwestern, the sale or other disposition of all or substantially all the assets of  the  Exploration and Production business segment other than to a corporation with respect to which, immediately following such sale or disposition, more than 80% of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, in the aggregate by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Southwestern Common Stock and Southwestern voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Southwestern Common Stock and Southwestern voting securities, as the case may be, immediately prior to such sale or disposition; or

(vii)

a majority of the Board of Directors determines in its sole and absolute discretion that there has been a Change in Control of Southwestern or that

there will be a Change in Control of Southwestern upon the occurrence of certain specified events and such events occur.

(e)

“Commencement Date” shall mean, with respect to a particular grant of Performance Units hereunder, the first day of the Plan Year immediately following the date of grant of such Performance Units.

(f)

“Company” shall mean Southwestern and each of its Subsidiaries.

(g)

“Disability” shall mean a condition entitling a Participant to benefits under the long-term disability policy maintained by the Company and applicable to him.

(h)

“Grant Agreement” shall mean a written document issued to a Participant that shall specify the grant of Performance Units to the Participant, the applicable Performance Measures set by the Plan Administrator and conditions to which the grant is subject.

(i)

“Participant” shall mean an employee of the Company who is eligible to participate in the Plan and to whom one or more Performance Units have been granted pursuant to the Plan and, following the death of any such employee, his or her successors, heirs, executors and administrators, as the case may be.

(j)

“Payment Value” shall mean, as of the end of each Performance Period, the value, expressed in dollars, of each Performance Unit issued under the Plan.  The Payment Value will be determined by multiplying the target value by the percentage or percentages assigned to the level of the Company’s actual financial performance, based on the Performance Measures and based on associated percentages assigned to the various levels of performance of the Performance Measures at the beginning of the Performance Period.  If the attainment of a Performance Measure occurs between the stated levels, the Payment Value will be determined by linear extrapolation.

(k)

“Performance Measures” shall mean the possible standards for measuring the Payment Value of the Performance Units, as determined by the Plan Administrator on the date of grant and as more particularly set forth in the Grant Agreement.

Relative performance will be measured against goals or against peers, as determined by the Plan Administrator on the date of grant.

(l)

“Performance Period” shall mean the time period over which the Performance Measures will be analyzed for purposes of determining the Payment Value of the Performance Units granted to a Participant.  Unless otherwise specified by the Plan Administrator, the Performance Period shall be thirty-six months from the Commencement Date.

(m)

“Performance Unit” shall mean a unit of interest under the Plan the value of which depends upon the financial performance of the Company in comparison to the Performance Measures specified for the applicable Performance Period.

(n)

“Plan” shall mean this Southwestern Energy Company 2002 Performance Unit Plan, as it may be amended from time to time.

(o)

“Plan Administrator” shall mean the individual or individuals as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Plan Administrator under the terms of the Plan, as set forth in Section 3 of this Plan.

(p)

“Plan Year” shall mean Southwestern’s fiscal year.

(q)

“Retirement” shall mean the termination of employment of a Participant with the Company for reasons other than Cause on or after the first date on which the Participant has both attained age 65 and completed five (5) years of service with the Company.

(r)

“Southwestern” shall mean Southwestern Energy Company, an Arkansas corporation, and any successor thereto.

(s)

“Subsidiary” shall mean any “subsidiary corporation” within the meaning of Section 425(f) of the Internal Revenue Code of 1986, as amended from time to time.

(t)

“Vesting Date” shall mean the date established by the Plan Administrator on which a Performance Unit may vest and becomes non-forfeitable except as set forth in Section 5 of this Plan.

3.  Administration of the Plan

The Plan shall be administered by a committee of the Board of Directors consisting of two or more persons, at least two of whom qualify as a "non-employee director," within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act, and an "outside director," within the meaning of Treasury Regulation Section 1.162-27(e)(2).  The Plan Administrator shall, consistent with the terms of the Plan, from time to time designate the employees of the Company who shall be granted Performance Units under the Plan.  All of the powers and responsibilities of the Plan Administrator under the Plan may be delegated by the Plan Administrator, in writing, to any subplan administrator thereof. In addition, the Plan Administrator may authorize an executive officer of Southwestern to grant Performance Units to a specified group of employees and within a specified period of time.

The Plan Administrator shall have full, discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and the terms of any Performance Unit (and any agreement evidencing any Performance Unit) granted

thereunder and to adopt and amend from time to time such rules and regulations for the administration of the Plan as the Plan Administrator may deem necessary or appropriate.  Decisions of the Plan Administrator shall be final, binding and conclusive on all parties.

At or after the date of grant of a Performance Unit under the Plan, the Plan Administrator may

(a)

accelerate the date on which any such Performance Unit becomes vested or paid,

(b)

extend the term of any such Performance Unit, including, without limitation, extending the period following a termination of a Participant’s employment during which  any Performance Unit may remain outstanding, or

(c)

waive any conditions to vesting of any such Performance Unit.

Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall bedetermined by the Plan Administrator.

No member of the Plan Administrator shall be liable for any action, omission or determination relating to the Plan, and Southwestern shall indemnify and hold harmless each member of the Plan Administrator and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Plan Administrator) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company.

4.  Eligibility

The employees who shall be eligible to receive Performance Units pursuant to the Plan shall be those employees of the Company that the Plan Administrator shall select from time to time, including those key employees (including officers of Southwestern, whether or not they are directors of Southwestern) who are largely responsible for the management, growth and protection of the business of the Company.  All Performance Units granted under the Plan shall be evidenced by a separate Grant Agreement entered into by the Company and the recipient of such award.

5.  Performance Units

The Plan Administrator may grant Performance Units pursuant to the Plan.  Each grant of a Performance Unit shall be evidenced by a Grant Agreement in such form as the Plan Administrator shall from time to time approve.  Each grant of a Performance Unit shall comply with and be subject to the following terms and conditions:

(a)

Grants

For each Performance Period, the Plan Administrator shall determine whether to grant any Performance Units and, if Performance Units are granted, the Plan Administrator shall notify those Participants who are to receive grants, which shall be evidenced by a Grant Agreement between Southwestern and the Participant.  The number of Performance Units to be granted to a Participant shall be determined by the Plan Administrator based on the Participant's role and responsibilities and competitive levels of long-term compensation.   No fractional Performance Units shall be granted.

For each Performance Period, the Plan Administrator shall determine the Performance Measures for the Performance Period, determine the weighting of the Performance Measures for the Performance Period and specify such approvals in the Grant Agreement.

(b)

Interests of a Participant

The Company shall create individual Accounts on its books to reflect the number of Performance Units credited to each Participant for a Performance Period.  No Participant or any other person shall under any circumstances acquire any property interest in any specific assets of the Company, and the Plan shall be unfunded.  Nothing contained in this Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company, the Plan Administrator or the Board of Directors and any Participant or any other person. To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

(c)

Vesting

Except as provided in Section 5(f) or as specified in the Grant Agreement, each Participant's right to the Performance Units awarded for any Performance Period shall vest one-third per year starting on the day of the first anniversary of the date of grant, provided that the Participant has not terminated employment.

(d)

Effect of Termination of Employment

(i)

Unless the Plan Administrator provides otherwise on or after the date of grant, in the event that the employment of a Participant with the Company shall terminate for any reason other than Cause, Disability, Retirement or death, all unvested Performance Units granted to such Participant shall expire at the commencement of business on the date of such termination, and no payment shall be made to the Participant with respect thereto.  Except as otherwise provided herein or in the Grant Agreement, Southwestern shall make payment respecting vested Performance Units

upon expiration of the original Performance Period under the original terms for such vested Performance Units.

(ii)

In the event of the termination of a Participant’s employment for Cause, all outstanding Performance Units granted to such Participant shall expire at the commencement of business on the date of such termination, and no payment shall be made to the Participant with respect thereto.

(iii)

In the event that the employment of a Participant with the Company shall terminate on account of the death, Disability or Retirement of the Participant, a portion of the unvested Performance Units granted to such Participant, to the extent not forfeited or cancelled on or prior to such termination pursuant to any provision hereof or the applicable Grant Agreement, shall vest on the date of such termination.  The portion referred to in the preceding sentence shall be determined separately under each Grant Agreement and shall be equal to the product of (a) the total number of Performance Units granted to such Participant under the applicable Grant Agreement and (b) a fraction, the numerator of which is the total number of days that have elapsed between the Grant Date of such Grant Agreement and the date such Participant’s employment terminated and the denominator of which is the total number of days between the Grant Date of such Grant Agreement and the final Vesting Date under such Grant Agreement.

(e)

Performance Unit Benefit

The Performance Units will have a Payment Value at the end of the applicable Performance Period contingent upon the attainment of the Performance Measures, as specified in the Participant’s Grant Agreement, as determined by the Plan Administrator.

The Plan Administrator shall use Southwestern’s year end audited financial statements in determining the extent to which the Performance Measures were achieved during the relevant Performance Period.  The Plan Administrator shall certify in writing whether and the extent to which the Performance Measure for each Performance Period has been met within 120 days following the issuance of such financial statements (the “Certification Period”).

The amount of the Payment Value due a Participant shall be made in cash.

Except as otherwise provided herein or in the Grant Agreement, Southwestern shall pay the Participant the total amount of Payment Value due the Participant at the conclusion of a Performance Period on such date following the conclusion of such Performance Period as the Plan Administrator shall designate, but in no event later than the earlier to occur of (i) the end of the Certification Period or (ii)

December 31 of the Plan Year immediately following the conclusion of such Performance Period.

The Plan Administrator may permit a Participant to defer the receipt of some or all of the payment due under this Section and have any such sum credited to a deferred compensation plan maintained by the Company, provided that such election is made before Payment Value is calculated and due, as specified by the applicable deferred compensation plan.

(f)

Effect of Change in Control

Upon the occurrence of a Change in Control, each Performance Unit granted under the Plan and outstanding at such time shall become fully and immediately vested.  In full satisfaction of amounts due under the Performance Units, Southwestern shall pay the Participant the target value (as specified in the Grant Agreement) or, if greater and the Plan Administrator, in its sole discretion, elects, an amount that the Plan Administrator determined to be the projected amount that would have been payable had the Performance Period run its cycle.  Such amounts shall be paid within five (5) business days after the Change in Control.

6.  No Special Employment Rights; No Right to Performance Unit

Nothing contained in the Plan or any Performance Unit shall confer upon any Participant any right with respect to the continuation of his employment by the Company or interfere in any way with the right of the Company at any time to terminate such employment or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of a Performance Unit.

No person shall have any claim or right to receive a Performance Unit hereunder.  The Plan Administrator's granting of a Performance Unit to a Participant at any time shall neither require the Plan Administrator to grant a Performance Unit to such Participant or any other Participant or other person at any time nor preclude the Plan Administrator from making subsequent grants to such  Participant or any other Participant or other person.

7.  Withholding Taxes

Upon the payment to the Participant of the Payment Value of the Performance Unit or any deferral of such payment, Southwestern shall have the right to withhold from any such payment required to be made pursuant thereto or such deferral an amount sufficient to satisfy the Federal, state and/or local withholding tax requirements, if any, attributable to such payment.

8.  Amendment or Termination of the Plan

The Board of Directors or Plan Administrator may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever.

Nothing herein shall restrict the Plan Administrator's ability to exercise its discretionary authority hereunder pursuant to Section 3 hereof, which discretion may be exercised without amendment to the Plan. However, no action hereunder may, without the consent of a Participant, reduce the Participant's rights under any previously granted and outstanding Performance Units.  Nothing herein shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.

9.  Transferability of Performance Unit

During the lifetime of a Participant, each Performance Unit to the Participant shall be exercisable by such Participant.  No Performance Unit shall be assignable or transferable otherwise than by will or by the laws of descent and distribution.

10.  Failure to Comply

In addition to the remedies of Southwestern elsewhere provided for herein, failure by a Participant to comply with any of the terms and conditions of the Plan or the agreement executed by such Participant evidencing a Performance Unit, unless such failure is remedied by such Participant within ten days after having been notified of such failure by the Plan Administrator, shall be grounds for the cancellation and forfeiture of such Performance Unit, in whole or in part, as the Plan Administrator may determine.

11.  Adjustment

Upon the occurrence of any event which could reasonably be expected to have an impact on the stock or Performance Measures of the Company or its peer companies, the Plan Administrator shall have the right, but not the obligation, in its sole discretion, to make such adjustments to the calculations of the payments to be made hereunder as it deems appropriate to reflect such events, provided that no such adjustments shall reduce the Participant’s rights under any previously granted and outstanding Performance Units.

12.  No Effect on Benefit Plans

No amounts payable hereunder shall count in computing any benefits payable under any other benefit plans maintained by the Company except to extent such plans otherwise incorporate such payments by express reference to the Plan.

13.  Governing Law

The interpretation, performance and enforcement of this Plan shall be governed by the laws of the State of Delaware, to the extent not preempted by Federal law.

14. Effective Date and Term of Plan

The Plan was adopted by the Board of Directors on December 11, 2002 and effective as of December 11, 2002.  No grants may be made under the Plan after December 31, 2014.

EX-10

Exhibit 10.20

SOUTHWESTERN ENERGY COMPANY

DIRECTORS NON-QUALIFIED STOCK OPTION

THIS CERTIFIES, that SOUTHWESTERN ENERGY COMPANY, a Delaware corporation (the "Company"), has, as of the _____ day of ____________, 2011, granted to ____________________ (the "Participant"), a Non-Qualified Stock Option to purchase _______ shares (the "Optioned Shares") of the Company's Common Stock ($.01 par value) ("Common Stock") on the terms and conditions of the SOUTHWESTERN ENERGY COMPANY 2004 STOCK INCENTIVE PLAN, as the same may be amended from time to time (the "Plan").

This Non-Qualified Stock Option is granted under and pursuant to the Plan and is subject to the conditions and limitations set forth in the Plan as the same may be amended from time to time.  All of the terms and provisions of the Plan, as amended from time to time, are incorporated herein by reference and nothing herein contained shall be deemed to vary or be given effect as modifying the terms of the Plan.

This Non-Qualified Stock Option shall be exercisable only in accordance with the provisions of this Certificate and the Plan except as otherwise provided in the Plan.

The exercise price of the Optioned Shares shall be $______ per share.  

This Non-Qualified Stock Option shall be exercisable in whole or in part; provided, that no partial exercise shall be for an aggregate exercise price of less than $1,000.  The partial exercise of this Non-Qualified Stock Option shall not cause the expiration, termination or cancellation of the remaining portion hereof.  

This Non-Qualified Stock Option shall be exercised by delivering notice to the Company's principal office, to the attention of its Secretary, no less than three business days in advance of the effective date of the proposed exercise.  Such notice shall be accompanied by this Certificate, shall specify the number of Optioned Shares with respect to which this Non-Qualified Stock Option is being exercised and the effective date of the proposed exercise and shall be signed by the Participant.  The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise.

Payment for Optioned Shares purchased upon the exercise of this Non-Qualified Stock Option shall be made on the effective date of such exercise in accordance with the terms of the Plan.

THIS NON-QUALIFIED STOCK OPTION SHALL FIRST BECOME EXERCISABLE WITH RESPECT TO THE FOLLOWING PERCENTAGE OF THE TOTAL SHARES SUBJECT HERETO ON THE FOLLOWING DATES:

Percentage of Total Shares	First Date on Which Such Percentage of Total Shares Becomes Exercisable
33 ⅓%
33 ⅓%
33 ⅓%

PROVIDED, HOWEVER, UPON THE OCCURRENCE OF A CHANGE IN CONTROL, IF AND TO THE EXTENT IT STILL IS OUTSTANDING, THIS NON-QUALIFIED STOCK OPTION SHALL BECOME FULLY AND IMMEDIATELY EXERCISABLE AND SHALL REMAIN EXERCISABLE UNTIL ITS EXPIRATION, TERMINATION OR CANCELLATION PURSUANT TO THE TERMS OF THE PLAN.  

NOTWITHSTANDING ANYTHING CONTRARY IN THE PLAN, IF A PARTICIPANT'S SERVICE WITH THE COMPANY HAS NOT BEEN TERMINATED FOR CAUSE, IN THE EVENT OF THE DEATH, DISABILITY (AS DEFINED IN THE PLAN) OR RETIREMENT AFTER AGE 65 (DEFINED BELOW) OF THE PARTICIPANT, THEN THE NON-QUALIFIED STOCK OPTION SHALL BECOME FULLY AND IMMEDIATELY EXERCISABLE AS OF THE ACTUAL DATE OF DEATH, DISABILITY OR RETIREMENT AFTER AGE 65 AND SHALL REMAIN EXERCISABLE FOR THE REMAINDER OF ITS ORIGINAL TERM SUBJECT TO THE PROVISIONS OF THE PLAN AND THIS AGREEMENT.  FOR PURPOSES OF THIS AGREEMENT, THE TERM "RETIREMENT AFTER AGE 65" SHALL MEAN THE TERMINATION OF SERVICE OF A PARTICIPANT WITH THE COMPANY FOR REASONS OTHER THAN CAUSE ON OR AFTER THE FIRST DATE ON WHICH THE PARTICIPANT HAS BOTH ATTAINED AGE 65 AND COMPLETED FIVE (5) YEARS OF SERVICE WITH THE COMPANY.

Notwithstanding any other provision of the Plan, in the event of (i) a dissolution or liquidation of Southwestern, (ii) a sale of all or substantially all of Southwestern’s assets or (iii) a merger or consolidation involving Southwestern, the Committee shall have the power to:

(A)

cancel, effective immediately prior to the occurrence of such event, each Option outstanding immediately prior to such event (whether or not then vested or exercisable), and, in full consideration of such cancellation, pay to the Director to whom such Option was granted an amount in cash, for each share of Common Stock subject to such Option immediately prior to such event, equal to the excess of (A) the value, as determined by the Committee of the property

(including cash) received by the holder of a share of Common Stock as a result of such event over (B) the exercise price of such Option; or

(B)

provide for the exchange of all or a portion of such Options outstanding immediately prior to such event (whether or not then vested or exercisable) for equivalent options covering securities of the acquiring entity (or the ultimate parent thereof) and, incident thereto, make an equitable adjustment as determined by the Committee in the exercise price of such exchanged option, and/or the number, type and class of securities subject to such exchanged option or, if appropriate, provide for a cash payment to the Director to whom such Option was granted in partial consideration for the exchange of the Option.

In the event of the occurrence of any event described above, the Committee shall, with respect to each Director’s Option outstanding immediately prior to such event (whether or not then vested or exercisable), take the action described in clause (A) above, except that the value of the property received in exchange for a share of Common Stock pursuant to such event shall be the Fair Market Value of such property.

THIS NON-QUALIFIED STOCK OPTION SHALL EXPIRE AND BE VOID AND SHALL NOT BE EXERCISABLE AFTER THE EXPIRATION OF SEVEN (7) YEARS FROM THE DATE AS OF WHICH IT WAS GRANTED AND MAY BE EXERCISED ONLY IN THE MANNER PROVIDED IN THE PLAN.  THIS NON-QUALIFIED STOCK OPTION SHALL BE SUBJECT TO EARLIER TERMINATION, EXPIRATION OR CANCELLATION AS PROVIDED IN THE PLAN.

By accepting this Certificate, the Participant agrees to all of the terms and conditions of the Plan as the same may be amended from time to time, and acknowledges that the Participant may review a complete copy of the Plan, which is on file in the office of the Secretary of Southwestern Energy Company, 2350 North Sam Houston Parkway East, Suite 125, Houston, Texas 77032.

IN WITNESS WHEREOF, the Company has issued this Non-Qualified Stock Option Certificate by its undersigned duly authorized officer as of the _____ day of ______________, 2011.

ATTEST:

SOUTHWESTERN ENERGY COMPANY

By:  

_____________________________

By:  _______________________________

Timothy J. O’Donnell,

STEVEN L. MUELLER,

Vice President – Corporate Affairs

President and Chief Executive Officer

EX-21

EXHIBIT 21
LIST OF SUBSIDIARIES
Subsidiary Name	Location of Incorporation or Organization
SEECO, Inc.	Arkansas
Southwestern Energy Production Company	Arkansas
Diamond “M” Production Company	Delaware
DeSoto Drilling, Inc.	Arkansas
DeSoto Sand, L.L.C.	Arkansas
Southwestern Midstream Services Company	Arkansas
Southwestern Energy Services Company	Arkansas
DeSoto Gathering Company, L.L.C.	Arkansas
A. W. Realty Company	Arkansas
Angelina Gathering Company, L.L.C.	Texas
Southwestern Field Services, L.L.C.	Arkansas
SWN International, L.L.C.	Delaware
SWN Producer Services, L.L.C.	Arkansas
SWN Resources Canada, Inc.	New Brunswick, Canada

EX-23

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-03787, 333-03789, 333-64961, 333-96161, 333-42494, 333-69720, 333-100702, 333-101160, 333-110140, 333-125714 and 333-121720) of Southwestern Energy Company of our report dated February 27, 2012 relating to the financial statementsand the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Houston, Texas
February 27, 2012

EX-23

Exhibit 23.2

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

As independent petroleum engineers, we hereby consent to (a) the use of our audit letter relating to the proved reserves of gas and oil of Southwestern Energy Company, (b) the references to us as experts in Southwestern Energy Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and (c) the incorporation by reference of our name and our audit letter into Southwestern Energy Company’s previously filed Registration Statements on Form S-8 (File Nos. 333-03787, 333-03789, 333-64961, 333-96161, 333-42494, 333-69720, 333-100702, 333-101160, 333-110140, 333-125714 and 333-121720), that incorporate by reference such Form 10-K.

NETHERLAND, SEWELL & ASSOCIATES, INC.

By:  /s/ DANNY D. SIMMONS

Danny D. Simmons, P.E.

President and Chief Operating Officer

Houston, Texas

February 27, 2012

EX-31

Exhibit 31.1

CERTIFICATION

I, Steven L. Mueller, certify that:

1. I have reviewed this annual report on Form 10-K 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:	February 27, 2012	/s/ STEVEN L. MUELLER
			Steven L. Mueller
			Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION

I, Greg D. Kerley, certify that:

1. I have reviewed this annual report on Form 10-K 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:	February 27, 2012	/s/ GREG D. KERLEY
			Greg D. Kerley
			Chief Financial Officer

EX-32

Exhibit 32

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)

          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), each of the undersigned officers of Southwestern Energy Company, a Delaware corporation (the "Company"), does hereby certify that:

          The Annual Report on Form 10-K for the year ended December 31, 2011 (the "Form 10-K") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  February 27, 2012	/s/ STEVEN L. MUELLER
	Steven L. Mueller
	Chief Executive Officer
Dated:  February 27, 2012	/s/ GREG D. KERLEY
	Greg D. Kerley
	Chief Financial Officer

EX-95

EXHIBIT 95.1

Mine Safety Disclosure

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), each operator of a mine is required to include certain mine safety results in its periodic reports filed with the U.S. Securities and Exchange Commission (“SEC”). Our mining operations are subject to regulation by the federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (“Mine Act”). Below, we present the following items regarding certain mining safety and health matters for the three months and year ended December 31, 2011:

• total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard under section 104 of the Mine Act for which we have received a citation from MSHA;

• total number of orders issued under section 104(b) of the Mine Act, which covers violations that had previously been cited under section 104(a) that, upon follow-up inspection by MSHA, are found not to have been totally abated within the prescribed time period, which results in the issuance of an order requiring the mine operator to immediately withdraw all persons (except certain authorized persons) from the mine;

• total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under section 104(d) of the Mine Act;

• total number of flagrant violations (i.e., reckless or repeated failure to make reasonable efforts to eliminate a known violation of a mandatory health or safety standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury) under section 110(b)(2) of the Mine Act;

• total number of imminent danger orders (i.e., the existence of any condition or practice in a mine which could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated) issued under section 107(a) of the Mine Act;

• total dollar value of proposed assessments from MSHA under the Mine Act;

• total number of mining-related fatalities; and

• total number of pending legal actions before the Federal Mine Safety and Health Review Commission involving such mine.

Southwestern Energy Company
Mine Safety Disclosure
Three Months Ended December 31, 2011
(Unaudited)
(Whole dollars)

			Section 104(d) Citations and Orders					Received Notice of Potential to Have Pattern Under Section 104(c)
	Section 104 S&S Citations	Section 104(b) Orders		Section 110(b)(2) Violations	Section 107(a) Orders	Total Dollar Value of Proposed MSHA Assessments(2)	Total Number of Mining Related  Fatalities		Legal Actions Pending as of the Last Day of the Periods	Legal Actions Initiated During Period
Operation(1)											Legal Actions Resolved During Period
DeSoto Sand, LLC	0	0	0	0	0	$0	0	0	1	0	0
Total						$0

(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)

Amounts included are the total dollar value of proposed or outstanding assessments received from MSHA on or before December 31, 2011 regardless of whether the assessment has been challenged or appealed, for alleged violations occurring during the three month period ended December 31, 2011.

Southwestern Energy Company
Mine Safety Disclosure
Year Ended December 31, 2011
(Unaudited)
(Whole dollars)

			Section 104(d) Citations and Orders					Received Notice of Potential to Have Pattern Under Section 104(c)
	Section 104 S&S Citations	Section 104(b) Orders		Section 110(b)(2) Violations	Section 107(a) Orders	Total Dollar Value of Proposed MSHA Assessments(2)	Total Number of Mining Related  Fatalities		Legal Actions Pending as of the Last Day ofthe Periods	Legal Actions Initiated During Period
Operation(1)											Legal Actions Resolved During Period
DeSoto Sand, LLC	1	0	0	0	0	$210.00	0	0	1	1	0
Total						$210.00

(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)

Amounts included are the total dollar value of proposed or outstanding assessments received from MSHA on or before December 31, 2011 regardless of whether the assessment has been challenged or appealed, for alleged violations occurring during the year ended December 31, 2011.

In addition, as required by the reporting requirements regarding mine safety included in§1503(a)(2) of the Dodd-Frank Act, the following is a list for the three months and year ended December 31, 2011, of each mine of which we or a subsidiary of ours is an operator, that has received written notice from MSHA of:

(a) 

a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of mine health or safety hazards under §104(e) of the Mine Act:           None

 (b) the potential to have such a pattern:           None

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.

EX-99

Exhibit 99.1 

Netherland, Sewell & Associates, Inc.	Chairman & CEO	Executive Committee
Worldwide Petroleum Consultants	C.H. (Scott) Rees III	P. Scott Frost - Dallas
	President & COO	J. Carter Henson, Jr. - Houston
	Danny D. Simmons	Dan Paul Smith - Dallas
	Executive VP	Joseph J. Spellman - Dallas
	G. Lance Binder	Thomas J. Tella II – Dallas

January 30, 2012

Mr. Jeffrey B. Sherrick

Southwestern Energy Company

Suite 125

2350 North Sam Houston Parkway East

Houston, Texas 77032

Dear Mr. Sherrick:

In accordance with your request, we have audited the estimates prepared by Southwestern Energy Company (Southwestern), as of December 31, 2011, of the proved reserves and future revenue to the Southwestern interest in certain oil and gas properties located in the United States.  It is our understanding that the proved reserves estimates shown herein constitute all of the proved reserves owned by Southwestern.  We have examined the estimates with respect to reserves quantities, reserves categorization, future producing rates, future net revenue, and the present value of such future net revenue, using the definitions set forth in U.S. Securities and Exchange Commission (SEC) Regulation S-X Rule 4-10(a).  The estimates of reserves and future revenue have been prepared in accordance with the definitions and regulations of the SEC and conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas, except that per-well overhead expenses are excluded for operated properties and future income taxes are excluded for all properties.  We completed our audit on or about the date of this letter.  This report has been prepared for Southwestern's use in filing with the SEC; in our opinion the assumptions, data, methods, and procedures used in the preparation of this report are appropriate for such purpose.  

The following table sets forth Southwestern's estimates of the net reserves and future net revenue, as of December 31, 2011, for the audited properties:

	Net Reserves		Future Net Revenue (M$)
	Oil	Gas		Present Worth
Category	(MBBL)	(MMCF)	Total	at 10%
Proved Developed Producing	833	3,173,993	7,298,924	4,058,116
Proved Developed Non-Producing	150	80,024	196,891	111,150
Proved Undeveloped	13	2,633,190	3,010,996	633,881
Total Proved	996	5,887,208	10,506,812	4,803,147

Totals may not add because of rounding.

The oil reserves shown include crude oil and condensate.  Oil volumes are expressed in thousands of barrels (MBBL); a barrel is equivalent to 42 United States gallons.  Gas volumes are expressed in millions of cubic feet (MMCF) at standard temperature and pressure bases.

When compared on a field-by-field basis, some of the estimates of Southwestern are greater and some are less than the estimates of Netherland, Sewell & Associates, Inc. (NSAI).  However, in our opinion the estimates of Southwestern's proved reserves and future revenue shown herein are, in the aggregate, reasonable and have been prepared in accordance with the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (SPE Standards).  Additionally, these estimates are within the recommended 10 percent tolerance threshold set forth in the SPE Standards.  We are satisfied with the methods and procedures used by Southwestern in preparing the December 31, 2011, estimates

of reserves and future revenue, and we saw nothing of an unusual nature that would cause us to take exception with the estimates, in the aggregate, as prepared by Southwestern.

The estimates shown herein are for proved reserves.  Southwestern's estimates do not include probable or possible reserves that may exist for these properties, nor do they include any value for undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated.  Reserves categorization conveys the relative degree of certainty; reserves subcategorization is based on development and production status.  The estimates of reserves and future revenue included herein have not been adjusted for risk.

Prices used by Southwestern are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2011.  For oil volumes, the average West Texas Intermediate posted price of $92.71 per barrel is adjusted by field for quality, transportation fees, and regional price differentials.  For gas volumes, the average Henry Hub spot price of $4.12 per MMBTU is adjusted by field for energy content, transportation fees, and regional price differentials.  All prices are held constant throughout the lives of the properties.  The average adjusted product prices weighted by production over the remaining lives of the properties are $92.21 per barrel of oil and $3.72 per MCF of gas.

Operating costs used by Southwestern are based on historical operating expense records.  For nonoperated properties, these costs include the per-well overhead expenses allowed under joint operating agreements along with estimates of costs to be incurred at and below the district and field levels.  Operating costs for the operated properties include only direct lease- and field-level costs.  For all properties, headquarters general and administrative overhead expenses of Southwestern are not included.  Capital costs used by Southwestern are based on authorizations for expenditure and actual costs from recent activity.  Capital costs are included as required for workovers, new development wells, and production equipment.  Operating costs are held constant throughout the lives of the properties, and capital costs are held constant to the date of expenditure.  Estimates do not include any salvage value for the lease and well equipment or the cost of abandoning the properties.

The reserves shown in this report are estimates only and should not be construed as exact quantities.  Proved reserves are those quantities of oil and gas which, by analysis of engineering and geoscience data, can be estimated with reasonable certainty to be economically producible; probable and possible reserves are those additional reserves which are sequentially less certain to be recovered than proved reserves.  Estimates of reserves may increase or decrease as a result of market conditions, future operations, changes in regulations, or actual reservoir performance.  In addition to the primary economic assumptions discussed herein, estimates of Southwestern and NSAI are based on certain assumptions including, but not limited to, that the properties will be developed consistent with current development plans, that the properties will be operated in a prudent manner, that no governmental regulations or controls will be put in place that would impact the ability of the interest owner to recover the reserves, and that projections of future production will prove consistent with actual performance.  If the reserves are recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts.  Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing these estimates.  

It should be understood that our audit does not constitute a complete reserves study of the audited oil and gas properties.  Our audit consisted primarily of substantive testing, wherein we conducted a detailed review of major properties making up approximately 92 percent of the company's total proved reserves and accounting for 90 percent of the present worth for those reserves.  In the conduct of our audit, we have not independently verified the accuracy and completeness of information and data furnished by Southwestern with respect to ownership interests, oil and gas production, well test data, historical costs of operation and development, product prices, or any agreements relating to current and future operations of the properties and sales of production.  However, if in the course of our examination something came to our attention that brought into question the validity or sufficiency of any such information or data, we did not rely on such information or data until we had satisfactorily resolved our questions relating thereto or had independently verified such information or data.  Our audit did not include a review of Southwestern's overall reserves management processes and practices.

We used standard engineering and geoscience methods, or a combination of methods, including performance analysis, volumetric analysis, and analogy, that we considered to be appropriate and necessary to establish the conclusions set forth herein.  As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geoscience data; therefore, our conclusions necessarily represent only informed professional judgment.

Supporting data documenting this audit, along with data provided by Southwestern, are on file in our office.  The technical persons responsible for conducting this audit meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the SPE Standards.  We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these properties nor are we employed on a contingent basis.

Sincerely,

NETHERLAND, SEWELL & ASSOCIATES, INC.

Texas Registered Engineering Firm F-2699

/s/ C.H. (Scott) Rees III

By:

C.H. (Scott) Rees III, P.E.

Chairman and Chief Executive Officer

/s/ Connor B. Riseden

/s/ William J. Knights

By:

By:

Connor B. Riseden, P.E. 100566

William J. Knights, P.G. 1532

Vice President

Vice President

Date Signed:  January 30, 2012

Date Signed:  January 30, 2012

CBR:MRL

XML

Divestiture (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 MMcf	Dec. 31, 2010 MMcf	May 25, 2011 MMcf
Divestiture Abstract
Proceeds from sale of oil and gas property and equipment	$ 118.1	$ 357.8
Divested assets, Haynesville and Middle Bossier Shales, Net acres		20,063	9,717
Net production per day of acreage sold in MMcf		13.5	7.0
Net proved reserves sold in Bcf	37.1	55.4
Restricted cash			85.0
Sales proceeds utilized for like-kind exchange transactions	$ 82.1

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Balance at beginning of period	$ 97,677	$ 24,720
Total gains or losses (realized/unrealized): Included in earnings	67,998	68,111
Total gains or losses (realized/unrealized): Included in other comprehensive income (loss)	79,215	63,522
Purchases, issuances, and settlements:
Settlements	(62,913)	(58,676)
Transfers into/out of Level 3	142
Balance at end of period	182,119	97,677
Change in unrealized gain (loss) included in earnings relating to derivatives still held as of December 31	5,085	9,435
7.5% Senior Notes due 2018 [Member]
Debt instrument, interest rate, stated percentage	7.50%
Debt instrument maturity	2018
Yield, Publicly-traded debt market	4.60%	5.20%
Carrying Amount [Member]
Cash and cash equivalents	15,627	16,055
Unsecured revolving credit facility	671,500	421,200
Senior notes	671,800	673,000
Total derivative instruments, net	704,830	160,452
Fair Value [Member]
Cash and cash equivalents	15,627	16,055
Unsecured revolving credit facility	671,500	421,200
Senior notes	773,578	761,372
Derivative assets	717,343	208,325
Derivative liabilities	(12,513)	(47,873)
Total derivative instruments, net	704,830	160,452
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member]
Derivative assets	0	0
Derivative liabilities	0	0
Total derivative instruments, net	0	0
Significant Observable Inputs, Level 2 [Member]
Derivative assets	534,560	86,883
Derivative liabilities	(11,849)	(24,108)
Total derivative instruments, net	522,711	62,775
Significant Unobservable Inputs, Level 3 [Member]
Derivative assets	182,783	121,442
Derivative liabilities	(664)	(23,765)
Total derivative instruments, net	$ 182,119	$ 97,677

XML

Natural Gas and Oil Properties (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flow hedges impact on ceiling value	$ 262,500,000
Ceiling test impairment, amount net of tax			558,300,000
Discounted future net cash flows to proved natural gas and oil reserves	10.00%
Average market prices per MMBtu for natural gas	4.12	4.38	3.87
Average market prices per barrel for oil	92.71	75.96	57.65
Henry Hub Natural Gas [Member]
Full cost ceiling test, Price	$ 4.12	4.38	$ 3.87

XML

Retirement and Employee Benefit Plans (One Percentage Point Change in Assumed Health Care Cost Trend Rates) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011
Pension Plan and Other Postretirement Benefits
Effect on the total service and interest cost components increase	$ 235
Effect on the total service and interest cost components decrease	(196)
Effect on postretirement benefit obligation increase	940
Effect on postretirement benefit obligation decrease	$ (788)

XML

Debt (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
7.15 % Senior Notes due 2018	$ 1,200,000	$ 1,200,000
Total short-term debt	1,200,000	1,200,000
Variable rate (2.276% at December 31, 2011 and 0.887% at December 31, 2010) unsecured revolving credit facility, expires February 2016	671,500,000	421,200,000
Long-term debt, excluding current maturities	1,342,100,000	1,093,000,000
Total debt	1,343,300,000	1,094,200,000
Unsecured revolving credit facility, variable rate	2.276%	0.887%
2012	1,200,000
2013	1,200,000
2014	1,200,000
2015	1,200,000
2016	672,700,000
Thereafter	665,800,000
Purchase price upon exercise of option				101.00%
Senior notes maturity date				Feb. 01, 2018
Unsecured revolving credit facility, expiration date	February 2016
Unsecured revolving credit facility, borrowing capacity	1,500,000,000
Unsecured revolving credit facility, maximum borrowing capacity	2,000,000,000
Unsecured revolving credit facility, interest rate description	The interest rate on the amended credit facility is calculated based upon our debt rating and is currently 200 basis points over the current London Interbank Offered Rate (LIBOR) and was 200 basis points over LIBOR at December 31, 2011.
Unsecured revolving credit facility, covenant terms	The Credit Facility is guaranteed by the Company's subsidiary, SEECO. The Credit Facility requires additional subsidiary guarantors if certain guaranty coverage levels are not satisfied. The revolving credit facility contains covenants which impose certain restrictions on the Company. Under the credit agreement, the Company may not issue total debt in excess of 60% of its total capital and must maintain a ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) to interest expense of 3.5 or above. The terms of the Credit Facility also include covenants that restrict the ability of the Company and its material subsidiaries to merge, consolidate or sell all or substantially all of their assets, restrict the ability of the Company and its subsidiaries to incur liens and restrict the ability of the Company's subsidiaries to incur indebtedness.
Unsecured revolving credit facility, covenant compliance	At December 31, 2011, the Company's capital structure consisted of 25% debt and 75% equity and it was in compliance with the covenants of its debt agreements. While the Company believes all of the lenders under the Credit Facility have the ability to provide funds, it cannot predict whether each will be able to meet its obligation under the facility
Amount outstanding under revolving credit facility	671,500,000	421,200,000
Interest on debt	65,421,000	57,144,000	55,581,000
7.5% Senior Notes due 2018 [Member]
Long-term debt: Senior notes	600,000,000	600,000,000
Debt instrument, interest rate, stated percentage	7.50%
Senior notes issued				600,000,000
7.35% Senior Notes due 2017 [Member]
Long-term debt: Senior notes	15,000,000	15,000,000
7.125% Senior Notes due 2017 [Member]
Long-term debt: Senior notes	25,000,000	25,000,000
Debt instrument, interest rate, stated percentage	7.125%
7.15% Senior Notes due 2018 [Member]
7.15 % Senior Notes due 2018	1,200,000	1,200,000
Total short-term debt	1,200,000	1,200,000
Long-term debt: Senior notes	$ 30,600,000	$ 31,800,000

XML

Quarterly Results (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Quarterly Results (Unaudited)
Revenues from external customers	$ 744,150	$ 767,255	$ 765,166	$ 676,335	$ 670,431	$ 682,172	$ 589,943	$ 668,117	$ 2,952,906	$ 2,610,663	$ 2,145,779
Operating income	263,890	295,718	282,542	232,651	256,685	270,136	206,317	288,090	1,074,801	1,021,228	(34,966)
Net income	158,533	175,173	167,454	136,609	149,418	160,638	122,009	171,768	637,769	603,833	(35,792)
Net Income (Loss) Attributable to Southwestern Energy	158,533	175,173	167,454	136,609	149,511	160,741	122,069	171,797	637,769	604,118	(35,650)
Earnings per share attributable to Southwestern Energy stockholders - Basic	$ 0.47	$ 0.50	$ 0.48	$ 0.39	$ 0.43	$ 0.47	$ 0.35	$ 0.50	$ 1.84	$ 1.75	$ (0.10)
Earnings per share attributable to Southwestern Energy stockholders - Diluted	$ 0.45	$ 0.50	$ 0.48	$ 0.39	$ 0.43	$ 0.46	$ 0.35	$ 0.49	$ 1.82	$ 1.73	$ (0.10)
Impairment of natural gas and oil properties									$ 0	$ 0	$ 907,812

XML

Natural Gas and Oil Producing Activities (Standardized Measures of Discounted Future Net Cash Flows Relating to Proved Natural Gas and Oil Reserves) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Natural Gas And Oil Producing Activities Abstract
Future cash inflows	$ 22,012,205	$ 19,620,254	$ 12,533,868
Future production costs	(8,080,207)	(6,826,915)	(4,488,884)
Future development costs	(3,425,185)	(3,025,433)	(2,367,206)
Future income tax expense	(3,366,175)	(3,143,571)	(1,569,242)
Future net cash flows	7,140,638	6,624,335	4,108,536
10% annual discount for estimated timing of cash flows	(3,689,838)	(3,610,585)	(2,306,718)
Standardized measure of discounted future net cash flows	$ 3,450,800	$ 3,013,750	$ 1,801,818
Average market prices per MMBtu for natural gas	4.12	4.38	3.87
Average market prices per barrel for oil	92.71	75.96	57.65

XML

Retirement and Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2011

Dec. 31, 2010

Retirement and Employee Benefit Plans [Abstract]

Changes in the plans' benefit obligations, fair value of assets, and funded status

			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
	(in thousands)
Change in benefit obligations:
Benefit obligation at January 1	$       67,933	$       56,736	$         4,955	$         3,271
Service cost	9,323	7,096	1,354	1,089
Interest cost	3,671	3,249	252	195
Participant contributions	0	0	19	15
Actuarial loss	6,967	6,311	302	462
Benefits paid	(6,156)	(5,029)	(89)	(77)
Plan amendments	0	168	0	0
Settlements	0	(598)	0	0
Benefit obligation at December 31	$       81,738	$       67,933	$         6,793	$         4,955
			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
	(in thousands)
Change in plan assets:
Fair value of plan assets at January 1	$       56,949	$       46,689	$                0	$                0
Actual return/(loss) on plan assets	4,717	6,276	0	0
Employer contributions	12,513	9,667	70	62
Participant contributions	0	0	19	15
Benefits paid	(6,156)	(5,029)	(89)	(77)
Settlements	0	(654)	0	0
Fair value of plan assets at December 31	$       68,023	$       56,949	$                0	$                0
Funded status of plans at December 31	$      (13,715)	$      (10,984)	$         (6,793)	$         (4,955)

Projected benefit obligation, accumulated benefit obligation and fair value of plan assets

	2011	2010
	(in thousands)
Projected benefit obligation	$          81,738	$          67,933
Accumulated benefit obligation	$          77,317	$          63,665
Fair value of plan assets	$          68,023	$          56,949

Pension and other postretirement benefit costs

				Other Postretirement
	Pension Benefits			Benefits
	2011	2010	2009	2011	2010	2009
	(in thousands)
Service cost	$    9,323	$    7,096	$    5,148	$     1,354	$     1,089	$        696
Interest cost	3,671	3,249	2,874	252	195	136
Expected return on plan assets	(4,398)	(3,503)	(2,809)	0	0	0
Amortization of transition obligation	0	0	0	64	65	65
Amortization of prior service cost	344	346	334	14	14	14
Amortization of net loss	856	806	846	11	21	7
Net periodic benefit cost	9,796	7,994	6,393	1,695	1,384	918
Settlements and curtailments	0	223	0	0	0	0
Total benefit cost	$    9,796	$    8,217	$    6,393	$     1,695	$     1,384	$        918

Amounts recognized in other comprehensive income

	Pension Benefits	Other Postretirement Benefits
	(in thousands)
Net actuarial loss arising during the year	$           (6,648)	$               (302)
Amortization of transition obligation	0	64
Amortization of prior service cost	344	14
Amortization of net loss	856	11
Tax effect	2,210	88
	$           (3,238)	$               (125)

Weighted average assumptions used in the measurement of benefit obligations

			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
Discount rate	5.00%	5.50%	5.00%	5.50%
Rate of compensation increase	4.50%	4.50%	n/a	n/a

Weighted average assumptions used in the measurement of net periodic benefit cost

				Other Postretirement
	Pension Benefits			Benefits
	2011	2010	2009	2011	2010	2009
Discount rate	5.50%	5.75%	6.00%	5.50%	5.75%	6.00%
Expected return on plan assets	7.50%	7.50%	7.50%	n/a	n/a	n/a
Rate of compensation increase	4.50%	4.50%	4.50%	n/a	n/a	n/a

Measurement purposes following trend rates were assumed

	2011	2010
Health care cost trend assumed for next year	9%	9%
Rate to which the cost trend is assumed to decline	5%	5%
Year that the rate reaches the ultimate trend rate	2031	2030

One percentage point change in assumed health care cost trend rates

	1% Increase	1% Decrease
	(in thousands)
Effect on the total service and interest cost components	$       235	$      (196)
Effect on postretirement benefit obligation	$       940	$      (788)

Benefit payments, which reflect expected future service

	Pension Benefits	Other Postretirement Benefits
	(in thousands)
2012	$            3,894	$                150
2013	$            4,808	$                217
2014	$            6,310	$                322
2015	$            6,183	$                443
2016	$            7,908	$                657
Years 2017-2021	$          54,647	$             5,321

Plan assets allocation to any asset class falls outside of the specified range

	Pension Plan Asset Allocations
Asset category:	Target	Actual
Equity securities:
U.S. large cap growth equity	6%	6%
U.S. large cap value equity	6%	5%
U.S. large cap core equity	15%	16%
U.S. small cap equity	3%	3%
Non-U.S. equity	25%	25%
Emerging markets equity	5%	5%
Fixed income and cash and cash equivalents	40%	40%
Total	100%	100%

Fair Value Measurement Of Pension Plan Assets [Table]

		Quoted Prices in Active Markets for Identical Assets	Significant Observable Inputs	Significant Unobservable Inputs
Asset category:	Total	(Level 1)	(Level 2)	(Level 3)
	(in thousands)
Equity securities:
U.S. large cap growth equity (1)	$         3,792	$         3,792	$               0	$               0
U.S. large cap value equity (2)	3,689	3,689	0	0
U.S. large cap core equity (3)	10,849	0	10,849	0
U.S. small cap equity (4)	2,201	2,201	0	0
Non-U.S. equity (5)	16,719	16,719	0	0
Emerging markets equity (6)	3,377	0	3,377	0
Fixed income (7)	25,192	0	25,192	0
Cash and cash equivalents	2,204	2,204	0	0
Total	$       68,023	$       28,605	$               39,418	$               0

		Quoted Prices in Active Markets for Identical Assets	Significant Observable Inputs	Significant Unobservable Inputs
Asset category:	Total	(Level 1)	(Level 2)	(Level 3)
	(in thousands)
Equity securities:
Large cap growth equity (1)	$         5,937	$         5,937	$               0	$               0
Large cap value equity (2)	5,838	5,838	0	0
Large cap core equity (3)	8,062	8,062	0	0
Small cap equity (4)	6,662	6,662	0	0
International equity (5)	8,333	8,333	0	0
Fixed income (6)	18,539	18,539	0	0
Cash and cash equivalents	3,578	3,578	0	0
Total	$       56,949	$       56,949	$               0	$               0

XML

Condensed Consolidating Financial Information (Condensed Consolidating Statement of Operations) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Revenues from external customers	$ 744,150	$ 767,255	$ 765,166	$ 676,335	$ 670,431	$ 682,172	$ 589,943	$ 668,117	$ 2,952,906		$ 2,610,663		$ 2,145,779
Gas purchases									709,091		611,161		482,836
Operating expenses									240,944		191,771		136,541
General and administrative expenses									158,041		145,563		122,618
Depreciation, depletion and amortization									704,511		590,332		493,658
Impairment of natural gas and oil properties									0		0		907,812
Taxes, other than income taxes									65,518		50,608		37,280
Total operating costs and expenses									1,878,105		1,589,435		2,180,745
Operating Income (Loss)	263,890	295,718	282,542	232,651	256,685	270,136	206,317	288,090	1,074,801		1,021,228		(34,966)
Other income, net									264		427		1,449
Equity in earnings of subsidiaries									0		0		0
Interest expense									24,075	[1]	26,163	[1]	18,638	[1]
Income (Loss) Before Income Taxes									1,050,990		995,492		(52,155)
Provision for income taxes									413,221	[1]	391,659	[1]	(16,363)
Net Income (Loss)	158,533	175,173	167,454	136,609	149,418	160,638	122,009	171,768	637,769		603,833		(35,792)
Less: Net Loss Attributable to Noncontrolling Interest									0		(285)		(142)
Net income (loss) attributable to Southwestern Energy	158,533	175,173	167,454	136,609	149,511	160,741	122,069	171,797	637,769		604,118		(35,650)
Parent [Member]
Revenues from external customers									0		0		0
Gas purchases									0		0		0
Operating expenses									0		0		0
General and administrative expenses									0		0		0
Depreciation, depletion and amortization									0		0		0
Impairment of natural gas and oil properties													0
Taxes, other than income taxes									0		0		0
Total operating costs and expenses									0		0		0
Operating Income (Loss)									0		0		0
Other income, net									0		0		0
Equity in earnings of subsidiaries									637,769		604,118		(35,650)
Interest expense									0		0		0
Income (Loss) Before Income Taxes									637,769		604,118		(35,650)
Provision for income taxes									0		0		0
Net Income (Loss)									637,769		604,118		(35,650)
Less: Net Loss Attributable to Noncontrolling Interest											0		0
Net income (loss) attributable to Southwestern Energy											604,118		(35,650)
Guarantors [Member]
Revenues from external customers									2,803,385		2,488,105		2,071,746
Gas purchases									710,487		612,745		483,922
Operating expenses									380,154		293,713		201,964
General and administrative expenses									141,499		127,022		109,870
Depreciation, depletion and amortization									665,615		559,845		472,757
Impairment of natural gas and oil properties													907,812
Taxes, other than income taxes									53,950		44,200		33,935
Total operating costs and expenses									1,951,705		1,637,525		2,210,260
Operating Income (Loss)									851,680		850,580		(138,514)
Other income, net									306		242		1,388
Equity in earnings of subsidiaries									0		0		0
Interest expense									11,277		10,777		12,760
Income (Loss) Before Income Taxes									840,709		840,045		(149,886)
Provision for income taxes									332,795		330,879		(53,549)
Net Income (Loss)									507,914		509,166		(96,337)
Less: Net Loss Attributable to Noncontrolling Interest											(285)		(142)
Net income (loss) attributable to Southwestern Energy											509,451		(96,195)
Non-Guarantors [Member]
Revenues from external customers									411,998		318,232		207,672
Gas purchases									0		0		0
Operating expenses									118,713		91,164		66,682
General and administrative expenses									19,700		19,525		13,196
Depreciation, depletion and amortization									38,896		30,487		20,901
Impairment of natural gas and oil properties													0
Taxes, other than income taxes									11,568		6,408		3,345
Total operating costs and expenses									188,877		147,584		104,124
Operating Income (Loss)									223,121		170,648		103,548
Other income, net									(42)		185		61
Equity in earnings of subsidiaries									0		0		0
Interest expense									12,798		15,386		5,878
Income (Loss) Before Income Taxes									210,281		155,447		97,731
Provision for income taxes									80,426		60,780		37,186
Net Income (Loss)									129,855		94,667		60,545
Less: Net Loss Attributable to Noncontrolling Interest											0		0
Net income (loss) attributable to Southwestern Energy											94,667		60,545
Eliminations [Member]
Revenues from external customers									(262,477)		(195,674)		(133,639)
Gas purchases									(1,396)		(1,584)		(1,086)
Operating expenses									(257,923)		(193,106)		(132,105)
General and administrative expenses									(3,158)		(984)		(448)
Depreciation, depletion and amortization									0		0		0
Impairment of natural gas and oil properties													0
Taxes, other than income taxes									0		0		0
Total operating costs and expenses									(262,477)		(195,674)		(133,639)
Operating Income (Loss)									0		0		0
Other income, net									0		0		0
Equity in earnings of subsidiaries									(637,769)		(604,118)		35,650
Interest expense									0		0		0
Income (Loss) Before Income Taxes									(637,769)		(604,118)		35,650
Provision for income taxes									0		0		0
Net Income (Loss)									(637,769)		(604,118)		35,650
Less: Net Loss Attributable to Noncontrolling Interest											0		0
Net income (loss) attributable to Southwestern Energy											$ (604,118)		$ 35,650

[1] (1) Interest income, interest expense and the provision (benefit) for income taxes by segment are an allocation of corporate amounts as cash equivalents, debt and income tax expense allocated as they are incurred at the corporate level.

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Retirement and Employee Benefit Plans (Fair Value Measurement of Pension Plan Assets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010
Equity Securities [Member]
Fair value of plan assets	$ 68,023		$ 56,949
Emerging Markets Equity [Member]
Fair value of plan assets	3,377	[1]
Large Cap Growth Equity [Member]
Fair value of plan assets	3,792	[2]	5,937	[2]
Large Cap Value Equity [Member]
Fair value of plan assets	3,689	[3]	5,838	[3]
Large Cap Core Equity [Member]
Fair value of plan assets	10,849	[4]	8,062	[4]
Small Cap Equity [Member]
Fair value of plan assets	2,201	[5]	6,662	[5]
International Equity [Member]
Fair value of plan assets	16,719	[6]	8,333	[6]
Fixed Income [Member]
Fair value of plan assets	25,192	[7]	18,539	[1]
Cash and Cash Equivalents [Member]
Fair value of plan assets	2,204		3,578
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Equity Securities [Member]
Fair value of plan assets	28,605		56,949
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Emerging Markets Equity [Member]
Fair value of plan assets	0	[1]
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Large Cap Growth Equity [Member]
Fair value of plan assets	3,792	[2]	5,937	[2]
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Large Cap Value Equity [Member]
Fair value of plan assets	3,689	[3]	5,838	[3]
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Large Cap Core Equity [Member]
Fair value of plan assets	0	[4]	8,062	[4]
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Small Cap Equity [Member]
Fair value of plan assets	2,201	[5]	6,662	[5]
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | International Equity [Member]
Fair value of plan assets	16,719	[6]	8,333	[6]
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Fixed Income [Member]
Fair value of plan assets	0	[7]	18,539	[1]
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Cash and Cash Equivalents [Member]
Fair value of plan assets	2,204		3,578
Significant Observable Inputs, Level 2 [Member] | Equity Securities [Member]
Fair value of plan assets	39,418		0
Significant Observable Inputs, Level 2 [Member] | Emerging Markets Equity [Member]
Fair value of plan assets	3,377	[1]
Significant Observable Inputs, Level 2 [Member] | Large Cap Growth Equity [Member]
Fair value of plan assets	0	[2]	0	[2]
Significant Observable Inputs, Level 2 [Member] | Large Cap Value Equity [Member]
Fair value of plan assets	0	[3]	0	[3]
Significant Observable Inputs, Level 2 [Member] | Large Cap Core Equity [Member]
Fair value of plan assets	10,849	[4]	0	[4]
Significant Observable Inputs, Level 2 [Member] | Small Cap Equity [Member]
Fair value of plan assets	0	[5]	0	[5]
Significant Observable Inputs, Level 2 [Member] | International Equity [Member]
Fair value of plan assets	0	[6]	0	[6]
Significant Observable Inputs, Level 2 [Member] | Fixed Income [Member]
Fair value of plan assets	25,192	[7]	0	[1]
Significant Observable Inputs, Level 2 [Member] | Cash and Cash Equivalents [Member]
Fair value of plan assets	0		0
Significant Unobservable Inputs, Level 3 [Member] | Equity Securities [Member]
Fair value of plan assets	0		0
Significant Unobservable Inputs, Level 3 [Member] | Emerging Markets Equity [Member]
Fair value of plan assets	0	[1]
Significant Unobservable Inputs, Level 3 [Member] | Large Cap Growth Equity [Member]
Fair value of plan assets	0	[2]	0	[2]
Significant Unobservable Inputs, Level 3 [Member] | Large Cap Value Equity [Member]
Fair value of plan assets	0	[3]	0	[3]
Significant Unobservable Inputs, Level 3 [Member] | Large Cap Core Equity [Member]
Fair value of plan assets	0	[4]	0	[4]
Significant Unobservable Inputs, Level 3 [Member] | Small Cap Equity [Member]
Fair value of plan assets	0	[5]	0	[5]
Significant Unobservable Inputs, Level 3 [Member] | International Equity [Member]
Fair value of plan assets	0	[6]	0	[6]
Significant Unobservable Inputs, Level 3 [Member] | Fixed Income [Member]
Fair value of plan assets	0	[7]	0	[1]
Significant Unobservable Inputs, Level 3 [Member] | Cash and Cash Equivalents [Member]
Fair value of plan assets	$ 0		$ 0

[1] (6) An institutional fund that invests primarily in the equity securities of companies domiciled in emerging markets. (7) An institutional fund that seeks to replicate the performance of the Barclays Capital Long-Term Corporate Bond Index before fees through a sampling process.

[2] (1) Mutual fund that seeks to invest in a diversified portfolio of stocks with price appreciation growth opportunities.

[3] (2) Mutual fund that seeks to invest in a diversified portfolio of stocks that will increase in value over the long-term as well as provide current income.

[4] (3) An institutional fund that seeks to replicate the performance of the S&P 500 Index before fees.

[5] (4) Mutual fund that seeks to invest in a diversified portfolio of stocks with small market capitalizations.

[6] (5) Mutual funds that invest primarily in equity securities of companies domiciled outside of the United States, primarily in developed markets.

[7] (7) An institutional fund that seeks to replicate the performance of the Barclays Capital Long-Term Corporate Bond Index before fees through a sampling process.

XML

Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Income Taxes
Effective tax rate of provision for income taxes	39.30%	39.30%	31.50%
Net long term deferred income tax liabilities	$ 1,586,798,000	$ 1,130,292,000
Net current deferred income tax liability	194,163,000	44,089,000
Paid in state income taxes	800,000	400,000
Alternative minimum tax payments	3,400,000	14,000,000
Operating Loss Carryforwards	878,200,000
Net operating loss carryforwards expire between 2027 and 2031	2027 through 2031
Alternative minimum tax credit carryforward	73,516,000	70,138,000
Statutory depletion carryforward	13,000,000
Windfalls included in net operating loss carryforwards but not reflected in deferred tax assets	110,300,000
Income tax years 2009-2011	2009 to 2011
Valuation allowance, amount	$ 2,000,000	$ 500,000.0

XML

Stock-Based Compensation (Summary Stock Option Activity, Options Outstanding and Options Exercisable) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 years	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Stock options, exercisable at December 31	3,482,068
Options Outstanding at December 31	4,741,732	4,769,122	5,649,233	7,396,537
Options Outstanding Weighted Average Exercise Price	$ 21.24
Options Outstanding Weighted Average Remaining Contractual Life (Years)	3.5
Aggregate Intrinsic Value	$ 60,505
Options Exercisable, Weighted Average Remaining Contractual Life (Years)	2.4
Options Exercisable, Aggregate Intrinsic Value	$ 60,484
1.43 - 3.10 [Member]
Stock options, exercisable at December 31	1,727,398
Options Outstanding at December 31	1,727,398
Options Outstanding Weighted Average Exercise Price	$ 2.10
Options Outstanding Weighted Average Remaining Contractual Life (Years)	1.5
Options Exercisable, Weighted Average Remaining Contractual Life (Years)	1.5
3.11 - 30.00 [Member]
Stock options, exercisable at December 31	856,544
Options Outstanding at December 31	862,650
Options Outstanding Weighted Average Exercise Price	$ 22.19
Options Outstanding Weighted Average Remaining Contractual Life (Years)	2.1
Options Exercisable, Weighted Average Remaining Contractual Life (Years)	2.1
30.01 - 36.00 [Member]
Stock options, exercisable at December 31	490,190
Options Outstanding at December 31	606,133
Options Outstanding Weighted Average Exercise Price	$ 31.54
Options Outstanding Weighted Average Remaining Contractual Life (Years)	4.4
Options Exercisable, Weighted Average Remaining Contractual Life (Years)	4.0
36.01 - 40.00 [Member]
Stock options, exercisable at December 31	153,086
Options Outstanding at December 31	1,130,705
Options Outstanding Weighted Average Exercise Price	$ 36.77
Options Outstanding Weighted Average Remaining Contractual Life (Years)	6.5
Options Exercisable, Weighted Average Remaining Contractual Life (Years)	5.5
40.01 - 51.47 [Member]
Stock options, exercisable at December 31	254,850
Options Outstanding at December 31	414,846
Options Outstanding Weighted Average Exercise Price	$ 41.60
Options Outstanding Weighted Average Remaining Contractual Life (Years)	5.0
Options Exercisable, Weighted Average Remaining Contractual Life (Years)	4.8

XML

Condensed Consolidating Financial Information (Condensed Consolidating Statements of Cash Flows) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Net cash provided by operating activities	$ 1,739,817	$ 1,642,585	$ 1,359,376
Capital investments	(2,184,474)	(2,073,174)	(1,780,165)
Proceeds from sale of property and equipment	154,526	350,227	818
Transfers to restricted cash	(85,055)	(356,035)	0
Transfers from restricted cash	85,055	356,035	0
Other	5,158	(2,684)	(1,257)
Net cash used in investing activities	(2,024,790)	(1,725,631)	(1,780,604)
Intercompany activities	0	0	0
Payments on current portion of long-term debt	(1,200)	(1,200)	(61,200)
Payments on revolving long-term debt	(3,445,900)	(2,958,100)	(1,371,700)
Borrowings under revolving long-term debt	3,696,200	3,054,800	1,696,200
Other	35,203	(9,260)	(25,165)
Net cash provided by financing activities	284,303	86,240	238,135
Effect of exchange rate changes on cash	242	(323)	0
Increase (decrease) in cash and cash equivalents	(428)	2,871	(183,093)
Cash and cash equivalents at beginning of year	16,055	13,184	196,277
Cash and cash equivalents at end of year	15,627	16,055	13,184
Parent [Member]
Net cash provided by operating activities	14,688	25,865	58,212
Capital investments	(66,647)	(46,062)	(17,075)
Proceeds from sale of property and equipment	0	0	0
Transfers to restricted cash	(85,055)	(356,035)
Transfers from restricted cash	85,055	356,035
Other	16,263	11,864	10,980
Net cash used in investing activities	(50,384)	(34,198)	(6,095)
Intercompany activities	(242,277)	(76,904)	(478,843)
Payments on current portion of long-term debt	(1,200)	(1,200)	(61,200)
Payments on revolving long-term debt	(3,445,900)	(2,958,100)	(1,371,700)
Borrowings under revolving long-term debt	3,696,200	3,054,800	1,696,200
Other	35,203	(9,260)	(25,165)
Net cash provided by financing activities	42,026	9,336	(240,708)
Effect of exchange rate changes on cash	0	0
Increase (decrease) in cash and cash equivalents	6,330	1,003	(188,591)
Cash and cash equivalents at beginning of year	8,381	7,378	195,969
Cash and cash equivalents at end of year	14,711	8,381	7,378
Guarantors [Member]
Net cash provided by operating activities	1,482,853	1,368,248	1,198,995
Capital investments	(1,916,246)	(1,718,847)	(1,517,990)
Proceeds from sale of property and equipment	154,261	348,274	763
Transfers to restricted cash	0	0
Transfers from restricted cash	0	0
Other	(43,961)	(22,719)	(29,238)
Net cash used in investing activities	(1,805,946)	(1,393,292)	(1,546,465)
Intercompany activities	315,462	26,899	353,246
Payments on current portion of long-term debt	0	0	0
Payments on revolving long-term debt	0	0	0
Borrowings under revolving long-term debt	0	0	0
Other	0	0	0
Net cash provided by financing activities	315,462	26,899	353,246
Effect of exchange rate changes on cash	0	0
Increase (decrease) in cash and cash equivalents	(7,631)	1,855	5,776
Cash and cash equivalents at beginning of year	7,631	5,776	0
Cash and cash equivalents at end of year	0	7,631	5,776
Non-Guarantors [Member]
Net cash provided by operating activities	242,276	248,472	102,169
Capital investments	(201,581)	(308,265)	(245,100)
Proceeds from sale of property and equipment	265	1,953	55
Transfers to restricted cash	0	0
Transfers from restricted cash	0	0
Other	32,856	8,171	17,001
Net cash used in investing activities	(168,460)	(298,141)	(228,044)
Intercompany activities	(73,185)	50,005	125,597
Payments on current portion of long-term debt	0	0	0
Payments on revolving long-term debt	0	0	0
Borrowings under revolving long-term debt	0	0	0
Other	0	0	0
Net cash provided by financing activities	(73,185)	50,005	125,597
Effect of exchange rate changes on cash	242	(323)
Increase (decrease) in cash and cash equivalents	873	13	(278)
Cash and cash equivalents at beginning of year	43	30	308
Cash and cash equivalents at end of year	916	43	30
Eliminations [Member]
Net cash provided by operating activities	0	0	0
Capital investments	0	0	0
Proceeds from sale of property and equipment	0	0	0
Transfers to restricted cash	0	0
Transfers from restricted cash	0	0
Other	0	0	0
Net cash used in investing activities	0	0	0
Intercompany activities	0	0	0
Payments on current portion of long-term debt	0	0	0
Payments on revolving long-term debt	0	0	0
Borrowings under revolving long-term debt	0	0	0
Other	0	0	0
Net cash provided by financing activities	0	0	0
Effect of exchange rate changes on cash	0	0
Increase (decrease) in cash and cash equivalents	0	0	0
Cash and cash equivalents at beginning of year	0	0	0
Cash and cash equivalents at end of year	$ 0	$ 0	$ 0

XML

Segment Information (Details) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009		May 25, 2011
Revenues from external customers	$ 744,150,000	$ 767,255,000	$ 765,166,000	$ 676,335,000	$ 670,431,000	$ 682,172,000	$ 589,943,000	$ 668,117,000	$ 2,952,906,000		$ 2,610,663,000		$ 2,145,779,000
Intersegment revenues									2,010,369,000		1,734,605,000		1,051,471,000
Operating income	263,890,000	295,718,000	282,542,000	232,651,000	256,685,000	270,136,000	206,317,000	288,090,000	1,074,801,000		1,021,228,000		(34,966,000)
Other income (loss), net									264,000	[1]	427,000	[1]	1,449,000	[1]
Depreciation, depletion and amortization expense									704,511,000		590,332,000		493,658,000
Impairment of natural gas and oil properties									0		0		907,812,000
Interest expense									24,075,000	[1]	26,163,000	[1]	18,638,000	[1]
Provision for income taxes									413,221,000	[1]	391,659,000	[1]	(16,363,000)
Assets	7,902,897,000				6,017,463,000				7,902,897,000		6,017,463,000		4,770,250,000
Capital investments									2,207,174,000		2,120,065,000		1,809,117,000	[2]
Restricted cash															85,000,000
Change in accrued expenditures									4,300,000		14,400,000		12,200,000
Assets related to E&P program in Canada	28,400,000				11,500,000				28,400,000		11,500,000
Exploration and Production [Member]
Revenues from external customers									2,088,763,000		1,871,835,000		1,582,596,000
Intersegment revenues									11,725,000		18,609,000		10,635,000
Operating income									825,138,000		829,462,000		(157,725,000)
Other income (loss), net									328,000	[1]	235,000	[1]	1,406,000	[1]
Depreciation, depletion and amortization expense									666,125,000		561,018,000		474,014,000
Impairment of natural gas and oil properties													907,812,000
Interest expense									9,026,000	[1]	7,888,000	[1]	15,237,000	[1]
Provision for income taxes									322,714,000	[1]	323,748,000	[1]	(61,725,000)
Assets	6,547,117,000				4,849,478,000				6,547,117,000		4,849,478,000		3,904,739,000
Capital investments									1,977,493,000		1,775,518,000		1,565,450,000	[2]
Midstream Services [Member]
Revenues from external customers									864,096,000		738,828,000		562,944,000
Intersegment revenues									1,995,423,000		1,715,012,000		1,040,388,000
Operating income									247,952,000		191,566,000		122,620,000
Other income (loss), net									(91,000)	[1]	179,000	[1]	34,000	[1]
Depreciation, depletion and amortization expense									37,261,000		28,765,000		19,213,000
Impairment of natural gas and oil properties													0
Interest expense									15,049,000	[1]	18,275,000	[1]	3,401,000	[1]
Provision for income taxes									90,221,000	[1]	67,834,000	[1]	45,303,000
Assets	1,119,861,000				1,016,563,000				1,119,861,000		1,016,563,000		767,346,000
Capital investments									160,776,000		271,316,000		214,208,000	[2]
Other [Member]
Revenues from external customers									47,000		0		239,000
Intersegment revenues									3,221,000		984,000		448,000
Operating income									1,711,000		200,000		139,000
Other income (loss), net									27,000	[1]	13,000	[1]	9,000	[1]
Depreciation, depletion and amortization expense									1,125,000		549,000		431,000
Impairment of natural gas and oil properties													0
Interest expense									0	[1]	0	[1]	0	[1]
Provision for income taxes									286,000	[1]	77,000	[1]	59,000
Assets	235,919,000				151,422,000				235,919,000		151,422,000		98,165,000
Capital investments									$ 68,905,000		$ 73,231,000		$ 29,459,000	[2]

[1] (1) Interest income, interest expense and the provision (benefit) for income taxes by segment are an allocation of corporate amounts as cash equivalents, debt and income tax expense allocated as they are incurred at the corporate level.

[2] (3) Capital investments include an increase of $4.3 million for 2011, an increase of $14.4 million for 2010 and an increase of $12.2 million for 2009 related to the change in accrued expenditures between years.

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Retirement and Employee Benefit Plans (Benefit Payments which Reflect Expected Future Service) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011
Pension Benefits [Member]
2012	$ 3,894
2013	4,808
2014	6,310
2015	6,183
2016	7,908
Years 2017-2021	54,647
Other Postretirement Benefits [Member]
2012	150
2013	217
2014	322
2015	443
2016	657
Years 2017-2021	$ 5,321

XML

Basis of Presentation and New Accounting Standards (Tables)

12 Months Ended

Dec. 31, 2011

Basis of Presentation and New Accounting Standards [Abstract]

Schedule of Cash Flow, Supplemental Disclosures

	For the years ended December 31,
	2011	2010	2009
	(in thousands)
Cash paid during the year for interest, net of amounts capitalized	$              19,159	$              24,049	$              16,453
Cash paid (received) during the year for income taxes	4,198	14,368	(41,469)
Increase in noncash property additions	30,389	46,588	28,951

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Derivatives and Risk Mangement (Balance Sheet Classification) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Total derivative assets	$ 717,343	$ 208,325
Total derivative liabilities	12,513	47,873
Designated as Hedging Instrument [Member]
Derivative Asset Designated as Hedging Instrument, Fair Value	713,640	208,292
Derivative Liability Designated as Hedging Instrument, Fair Value	12,058	45,865
Designated as Hedging Instrument [Member] | Fixed and Floating Price Swaps [Member] | Hedging Asset [Member]
Derivative Asset Designated as Hedging Instrument, Fair Value	333,479	81,797
Designated as Hedging Instrument [Member] | Fixed and Floating Price Swaps [Member] | Other Assets
Derivative Asset Designated as Hedging Instrument, Fair Value	201,081	5,086
Designated as Hedging Instrument [Member] | Fixed and Floating Price Swaps [Member] | Hedging Liability [Member]
Derivative Liability Designated as Hedging Instrument, Fair Value	11,849	1,774
Designated as Hedging Instrument [Member] | Fixed and Floating Price Swaps [Member] | Long-Term Hedging Liability [Member]
Derivative Liability Designated as Hedging Instrument, Fair Value	0	22,334
Designated as Hedging Instrument [Member] | Costless Collar [Member] | Hedging Asset [Member]
Derivative Asset Designated as Hedging Instrument, Fair Value	179,080	48,582
Designated as Hedging Instrument [Member] | Costless Collar [Member] | Other Assets
Derivative Asset Designated as Hedging Instrument, Fair Value	0	72,827
Designated as Hedging Instrument [Member] | Costless Collar [Member] | Hedging Liability [Member]
Derivative Liability Designated as Hedging Instrument, Fair Value	209	3,903
Designated as Hedging Instrument [Member] | Costless Collar [Member] | Long-Term Hedging Liability [Member]
Derivative Liability Designated as Hedging Instrument, Fair Value	0	17,854
Not Designated as Hedging Instrument [Member]
Derivative Asset Not Designated as Hedging Instrument, Fair Value	3,703	33
Derivative Liability Not Designated as Hedging Instrument, Fair Value	455	2,008
Not Designated as Hedging Instrument [Member] | Basis Swaps [Member] | Hedging Asset [Member]
Derivative Asset Not Designated as Hedging Instrument, Fair Value	1,906	33
Not Designated as Hedging Instrument [Member] | Basis Swaps [Member] | Other Assets
Derivative Asset Not Designated as Hedging Instrument, Fair Value	1,797	0
Not Designated as Hedging Instrument [Member] | Basis Swaps [Member] | Hedging Liability [Member]
Derivative Liability Not Designated as Hedging Instrument, Fair Value	400	2,008
Not Designated as Hedging Instrument [Member] | Basis Swaps [Member] | Long-Term Hedging Liability [Member]
Derivative Liability Not Designated as Hedging Instrument, Fair Value	$ 55	$ 0

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Natural Gas and Oil Producing Activities (Composition of Net Unevaluated Costs Excluded from Amortization) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended			72 Months Ended	108 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2011
Property acquisition costs	$ 254,622	$ 143,165	$ 44,513	$ 110,767	$ 553,067	[1]
Exploration and development costs	190,240	20,844	29,527	67,335	307,946	[1]
Capitalized interest	14,651	12,901	10,261	44,064	81,877	[1]
Net unevaluated costs excluded from amortization	459,513	176,910	84,301	222,166	942,890	[1]
Exploration Program in Canada [Member]
Property acquisition costs	7,500
Exploration and development costs	19,200
Capitalized interest	1,200
Net unevaluated costs excluded from amortization	27,900
Seismic Costs Fayetteville Shale Play [Member]
Net unevaluated costs excluded from amortization	83,200
Undeveloped Properties Fayetteville Shale Play [Member]
Net unevaluated costs excluded from amortization	101,300
Undeveloped Properties Marcellus Shale Play [Member]
Net unevaluated costs excluded from amortization	179,400
Undeveloped Properties New Ventures - Excluding Canada [Member]
Net unevaluated costs excluded from amortization	245,000
Exploration Program in Canada [Member]
Net unevaluated costs excluded from amortization	27,900	10,700
Wells In Progress [Member]
Net unevaluated costs excluded from amortization	$ 180,200

[1] (1) Property acquisition costs include $7.5 million, exploration costs include $19.2 million and capitalized interest includes $1.2 million related to our exploration program in New Brunswick, Canada.

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Stock-Based Compensation (Risk-Free Interest Rate) (Details)	12 Months Ended
	Dec. 31, 2011 years	Dec. 31, 2010 years	Dec. 31, 2009 years
Stock-Based Compensation [Abstract]
Risk-free interest rate	0.90%	2.00%	2.20%
Expected dividend yield
Expected volatility	58.10%	60.10%	61.60%
Expected term, in years	5	5	5

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Condensed Consolidating Financial Information (Tables)

12 Months Ended

Dec. 31, 2011

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Statements of Operations

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
	Parent	Guarantors	Non-Guarantors	Eliminations	Consolidated
	(in thousands)
Year ended December 31, 2011:
Operating revenues	$                      0	$       2,803,385	$           411,998	$         (262,477)	$        2,952,906
Operating costs and expenses:
Gas purchases	0	710,487	0	(1,396)	709,091
Operating expenses	0	380,154	118,713	(257,923)	240,944
General and administrative expenses	0	141,499	19,700	(3,158)	158,041
Depreciation, depletion and amortization	0	665,615	38,896	0	704,511
Taxes, other than income taxes	0	53,950	11,568	0	65,518
Total operating costs and expenses	0	1,951,705	188,877	(262,477)	1,878,105
Operating income	0	851,680	223,121	0	1,074,801
Other income, net	0	306	(42)	0	264
Equity in earnings of subsidiaries	637,769	0	0	(637,769)	0
Interest expense	0	11,277	12,798	0	24,075
Income (loss) before income taxes	637,769	840,709	210,281	(637,769)	1,050,990
Provision for income taxes	0	332,795	80,426	0	413,221
Net income (loss)	637,769	507,914	129,855	(637,769)	637,769
Year ended December 31, 2010:
Operating revenues	$                      0	$       2,488,105	$           318,232	$         (195,674)	$        2,610,663
Operating costs and expenses:
Gas purchases	0	612,745	0	(1,584)	611,161
Operating expenses	0	293,713	91,164	(193,106)	191,771
General and administrative expenses	0	127,022	19,525	(984)	145,563
Depreciation, depletion and amortization	0	559,845	30,487	0	590,332
Taxes, other than income taxes	0	44,200	6,408	0	50,608
Total operating costs and expenses	0	1,637,525	147,584	(195,674)	1,589,435
Operating income	0	850,580	170,648	0	1,021,228
Other income, net	0	242	185	0	427
Equity in earnings of subsidiaries	604,118	0	0	(604,118)	0
Interest expense	0	10,777	15,386	0	26,163
Income (loss) before income taxes	604,118	840,045	155,447	(604,118)	995,492
Provision for income taxes	0	330,879	60,780	0	391,659
Net income (loss)	604,118	509,166	94,667	(604,118)	603,833
Less: Net loss attributable to noncontrolling interest	0	(285)	0	0	(285)
Net income (loss) attributable to Southwestern Energy	$           604,118	$           509,451	$              94,667	$         (604,118)	$            604,118
Year ended December 31, 2009:
Operating revenues	$                      0	$       2,071,746	$           207,672	$         (133,639)	$        2,145,779
Operating costs and expenses:
Gas purchases	0	483,922	0	(1,086)	482,836
Operating expenses	0	201,964	66,682	(132,105)	136,541
General and administrative expenses	0	109,870	13,196	(448)	122,618
Depreciation, depletion and amortization	0	472,757	20,901	0	493,658
Impairment of natural gas & oil properties	0	907,812	0	0	907,812
Taxes, other than income taxes	0	33,935	3,345	0	37,280
Total operating costs and expenses	0	2,210,260	104,124	(133,639)	2,180,745
Operating income (loss)	0	(138,514)	103,548	0	(34,966)
Other income, net	0	1,388	61	0	1,449
Equity in earnings of subsidiaries	(35,650)	0	0	35,650	0
Interest expense	0	12,760	5,878	0	18,638
Income (loss) before income taxes	(35,650)	(149,886)	97,731	35,650	(52,155)
Provision (benefit) for income taxes	0	(53,549)	37,186	0	(16,363)
Net income (loss)	(35,650)	(96,337)	60,545	35,650	(35,792)
Less: Net loss attributable to noncontrolling interest	0	(142)	0	0	(142)
Net income (loss) attributable to Southwestern Energy	$            (35,650)	$            (96,195)	$              60,545	$             35,650	$             (35,650)

Condensed Consolidating Balance Sheets

CONDENSED CONSOLIDATING BALANCE SHEETS
	Parent	Guarantors	Non- Guarantors	Eliminations	Consolidated
	(in thousands)
December 31, 2011:
ASSETS
Cash and cash equivalents	$         14,711	$                  0	$              916	$                0	$        15,627
Accounts receivable	2,914	309,038	29,963	0	341,915
Inventories	0	45,260	974	0	46,234
Other current assets	6,087	563,635	4,780	0	574,502
Total current assets	23,712	917,933	36,633	0	978,278
Intercompany receivables	2,053,132	53	23,517	(2,076,702)	0
Property and equipment	180,300	9,731,944	1,148,575	0	11,060,819
Less: Accumulated depreciation, depletion and amortization	57,254	4,220,205	137,880	0	4,415,339
	123,046	5,511,739	1,010,695	0	6,645,480
Investments in subsidiaries (equity method)	3,256,195	0	0	(3,256,195)	0
Other assets	28,641	227,152	23,346	0	279,139
Total assets	$    5,484,726	$    6,656,877	$    1,094,191	$  (5,332,897)	$   7,902,897
LIABILITIES AND EQUITY
Accounts and notes payable	$      206,541	$       332,710	$         37,276	$                0	$       576,527
Other current liabilities	4,712	301,170	2,504	0	308,386
Total current liabilities	211,253	633,880	39,780	0	884,913
Intercompany payables	0	1,628,750	447,952	(2,076,702)	0
Long-term debt	1,342,100	0	0	0	1,342,100
Deferred income taxes	(97,045)	1,442,576	241,267	0	1,586,798
Other liabilities	59,114	54,826	5,842	0	119,782
Total liabilities	1,515,422	3,760,032	734,841	(2,076,702)	3,933,593
Commitments and contingencies
Total equity	3,969,304	2,896,845	359,350	(3,256,195)	3,969,304
Total liabilities and equity	$    5,484,726	$    6,656,877	$     1,094,191	$  (5,332,897)	$    7,902,897
December 31, 2010:
ASSETS
Cash and cash equivalents	$           8,381	$           7,631	$                43	$                0	$         16,055
Accounts receivable	382	331,154	20,037	0	351,573
Inventories	0	34,263	835	0	35,098
Other current assets	5,015	171,060	2,092	0	178,167
Total current assets	13,778	544,108	23,007	0	580,893
Intercompany receivables	1,820,857	131	18,724	(1,839,712)	0
Investments	0	11,103	(11,102)	(1)	0
Property and equipment	124,823	7,871,279	984,783	0	8,980,885
Less: Accumulated depreciation, depletion and amortization	52,256	3,526,010	104,422	0	3,682,688
	72,567	4,345,269	880,361	0	5,298,197
Investments in subsidiaries (equity method)	2,253,871	0	0	(2,253,871)	0
Other assets	18,918	92,747	26,708	0	138,373
Total assets	$    4,179,991	$    4,993,358	$       937,698	$  (4,093,584)	$    6,017,463
LIABILITIES AND EQUITY
Accounts and notes payable	$       175,476	$       336,411	$         33,208	$                0	$       545,095
Other current liabilities	3,288	142,839	2,761	0	148,888
Total current liabilities	178,764	479,250	35,969	0	693,983
Intercompany payable	0	1,317,696	522,017	(1,839,713)	0
Long-term debt	1,093,000	0	0	0	1,093,000
Deferred income taxes	(98,206)	1,066,166	162,332	0	1,130,292
Other liabilities	41,557	89,986	3,769	0	135,312
Total liabilities	1,215,115	2,953,098	724,087	(1,839,713)	3,052,587
Commitments and contingencies
Total equity	2,964,876	2,040,260	213,611	(2,253,871)	2,964,876
Total liabilities and equity	$    4,179,991	$    4,993,358	$       937,698	$  (4,093,584)	$    6,017,463

Condensed Consolidating Statements of Cash Flows

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
	Parent	Guarantors	Non-Guarantors	Eliminations	Consolidated
	(in thousands)
Year ended December 31, 2011:
Net cash provided by operating activities	$      14,688	$ 1,482,853	$    242,276	$              0	$ 1,739,817
Investing activities:
Capital investments	(66,647)	(1,916,246)	(201,581)	0	(2,184,474)
Proceeds from sale of property and equipment	0	154,261	265	0	154,526
Transfers to restricted cash	(85,055)	0	0	0	(85,055)
Transfers from  restricted cash	85,055	0	0	0	85,055
Other	16,263	(43,961)	32,856	0	5,158
Net cash used in investing activities	(50,384)	(1,805,946)	(168,460)	0	(2,024,790)
Financing activities:
Intercompany activities	(242,277)	315,462	(73,185)	0	0
Payments on current portion of long-term debt	(1,200)	0	0	0	(1,200)
Payments on revolving long-term debt	(3,445,900)	0	0	0	(3,445,900)
Borrowings under revolving long-term debt	3,696,200	0	0	0	3,696,200
Other	35,203	0	0	0	35,203
Net cash provided by financing activities	42,026	315,462	(73,185)	0	284,303
Effect of exchange rate changes on cash	0	0	242	0	242
Increase (decrease) in cash and cash equivalents	6,330	(7,631)	873	0	(428)
Cash and cash equivalents at beginning of year	8,381	7,631	43	0	16,055
Cash and cash equivalents at end of year	$        14,711	$            0	$           916	$              0	$      15,627
Year ended December 31, 2010:
Net cash provided by operating activities	$      25,865	$ 1,368,248	$    248,472	$              0	$ 1,642,585
Investing activities:
Capital investments	(46,062)	(1,718,847)	(308,265)	0	(2,073,174)
Proceeds from sale of property and equipment	0	348,274	1,953	0	350,227
Transfers to restricted cash	(356,035)	0	0	0	(356,035)
Transfers from  restricted cash	356,035	0	0	0	356,035
Other	11,864	(22,719)	8,171	0	(2,684)
Net cash used in investing activities	(34,198)	(1,393,292)	(298,141)	0	(1,725,631)
Financing activities:
Intercompany activities	(76,904)	26,899	50,005	0	0
Payments on current portion of long-term debt	(1,200)	0	0	0	(1,200)
Payments on revolving long-term debt	(2,958,100)	0	0	0	(2,958,100)
Borrowings under revolving long-term debt	3,054,800	0	0	0	3,054,800
Other	(9,260)	0	0	0	(9,260)
Net cash provided by financing activities	9,336	26,899	50,005	0	86,240
Effect of exchange rate changes on cash	0	0	(323)	0	(323)
Increase in cash and cash equivalents	1,003	1,855	13	0	2,871
Cash and cash equivalents at beginning of year	7,378	5,776	30	0	13,184
Cash and cash equivalents at end of year	$        8,381	$         7,631	$             43	$              0	$      16,055
Year ended December 31, 2009:
Net cash provided by operating activities	$      58,212	$ 1,198,995	$    102,169	$              0	$ 1,359,376
Investing activities:
Capital investments	(17,075)	(1,517,990)	(245,100)	0	(1,780,165)
Proceeds from sale of property and equipment	0	763	55	0	818
Other	10,980	(29,238)	17,001	0	(1,257)
Net cash used in investing activities	(6,095)	(1,546,465)	(228,044)	0	(1,780,604)
Financing activities:
Intercompany activities	(478,843)	353,246	125,597	0	0
Payments on current portion of long-term debt	(61,200)	0	0	0	(61,200)
Payments on revolving long-term debt	(1,371,700)	0	0	0	(1,371,700)
Borrowings under revolving long-term debt	1,696,200	0	0	0	1,696,200
Other	(25,165)	0	0	0	(25,165)
Net cash provided by (used in) financing activities	(240,708)	353,246	125,597	0	238,135
Increase (decrease) in cash and cash equivalents	(188,591)	5,776	(278)	0	(183,093)
Cash and cash equivalents at beginning of year	195,969	0	308	0	196,277
Cash and cash equivalents at end of year	$        7,378	$         5,776	$             30	$              0	$      13,184

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Derivatives and Risk Management (Cash Flow Hedges on Volumes of Natural Gas Production) (Details)	Dec. 31, 2011
Year 2012 [Member] | Costless Collar [Member]
Volume of Natural Gas Production (in Bcf), Cash Flow Hedges	80.50
Year 2012 [Member] | Fixed Price Swaps [Member]
Volume of Natural Gas Production (in Bcf), Cash Flow Hedges	185.90
Year 2013 [Member] | Costless Collar [Member]
Volume of Natural Gas Production (in Bcf), Cash Flow Hedges	0.00
Year 2013 [Member] | Fixed Price Swaps [Member]
Volume of Natural Gas Production (in Bcf), Cash Flow Hedges	185.20

XML

Retirement and Employee Benefit Plans (Pension Weighted Average Assumptions Used in the Measurement of Benefit Obligations) (Details)	Dec. 31, 2011	Dec. 31, 2010
Pension Benefits [Member]
Discount rate	5.00%	5.50%
Rate of compensation increase	4.50%	4.50%
Other Postretirement Benefits [Member]
Discount rate	5.00%	5.50%
Rate of compensation increase	0.00%	0.00%

XML

Asset Retirement Obligations (Components of Asset Retirement Obligations) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Asset Retirement Obligation
Asset retirement obligation at January 1	$ 27,786	$ 22,972
Accretion of discount	1,361	1,095
Obligations incurred	4,304	6,926
Obligations settled/removed	(883)	(477)
Revisions of estimates	5,125	(2,730)
Asset retirement obligation at December 31	37,693	27,786
Current liability	1,539	1,829
Long-term liability	36,154	25,957
Asset retirement obligation at December 31	$ 37,693	$ 27,786

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Natural Gas and Oil Producing Activities (Analysis of Changes in the Standardized Measure) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Natural Gas And Oil Producing Activities Abstract
Standardized measure, beginning of year	$ 3,013,750	$ 1,801,818	$ 2,109,262
Sales and transfers of natural gas and oil produced, net of production costs	(1,632,156)	(1,516,571)	(1,330,256)
Net changes in prices and production costs	(381,131)	706,062	(1,321,404)
Extensions, discoveries, and other additions, net of future production and development costs	1,163,992	1,205,464	976,449
Acquisition of reserves in place	30	0	1,878
Sales of reserves in place	(11,761)	(6,269)	(4,430)
Revisions of previous quantity estimates	34,221	324,284	88,261
Accretion of discount	426,245	230,355	302,439
Net change in income taxes	(103,643)	(746,971)	413,399
Changes in estimated future development costs	70,492	(10,558)	204,005
Previously estimated development costs incurred during the year	564,894	353,560	218,625
Changes in production rates (timing) and other	305,867	672,576	143,590
Standardized measure, end of year	$ 3,450,800	$ 3,013,750	$ 1,801,818

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Basis of Presentation and New Accounting Standards

12 Months Ended

Dec. 31, 2011

Basis of Presentation and New Accounting Standards [Abstract]

Basis of Presentation and New Accounting Standards

 

(1)ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

        Southwestern Energy Company (including its subsidiaries, collectively, "Southwestern" or the "Company") is an independent energy company engaged in natural gas and oil exploration, development and production. The Company engages in natural gas and oil exploration and production, natural gas gathering and natural gas marketing through its subsidiaries. Southwestern's exploration, development and production ("E&P") activities are principally focused within the United States on development of an unconventional gas reservoir located on the Arkansas side of the Arkoma Basin, which the Company refers to as the Fayetteville Shale play.  The Company is also actively engaged in exploration and production activities in Pennsylvania, where we are targeting the unconventional gas reservoir known as the Marcellus Shale, and to a lesser extent in Texas and in Arkansas and Oklahoma in the Arkoma Basin.  The Company has recently commenced exploration operations in southern Arkansas and northern Louisiana testing a new unconventional horizontal oil play targeting the Lower Smackover Brown Dense formation.  Southwestern's natural gas gathering and marketing (Midstream Services) activities primarily support the Company's E&P activities in Arkansas, Pennsylvania and Texas.

Basis of Presentation

The consolidated financial statements included in this Annual Report on Form 10-K present the Company's financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.The Company evaluates subsequent events through the date the financial statements are issued.

Principles of Consolidation

The consolidated financial statements include the accounts of Southwestern and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In 2010, the Company purchased the non-controlling interest in Overton Partners, L.P.

Revenue Recognition

Gas and oil sales. Gas sales and oil sales are recognized when the products are sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is reasonably assured. The Company uses the entitlement method that requires revenue recognition for the Company's net revenue interest of sales from its properties. Accordingly, gas sales and oil sales are not recognized for deliveries in excess of the Company's net revenue interest, while gas sales and oil sales are recognized for any under delivered volumes. Production imbalances are generally recorded at estimated sales prices of the anticipated future settlements of the imbalances. At December 31, 2011, the Company had overproduction of 6.1 Bcf valued at $22.5 million and underproduction of 6.4 Bcf valued at $22.9 million. At December 31, 2010, the Company had overproduction of 3.9 Bcf valued at $13.3 million and underproduction of 3.7 Bcf valued at $12.8 million.

Gas marketing. The Company generally markets its natural gas, as well as some gas produced by third parties, to brokers, local distribution companies and end-users, pursuant to a variety of contracts. Gas marketing revenues are recognized when delivery of natural gas has occurred, title has transferred, the price is fixed or determinable and collectability of the revenue is reasonably assured.

Gas gathering. The Company gathers its natural gas, as well as some gas produced by third parties, pursuant to a variety of contracts. Gas gathering revenues are recognized when the service is performed, the price is fixed or determinable and collectability of the revenue is reasonably assured.

Other. The Company maintains an underground gas storage facility and generally sells natural gas from its storage facility during the winter gas withdrawal season. Revenue is recognized on natural gas storage sales when the natural gas is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is reasonably assured. Other revenues include gains of $0.9 million, $2.5 million and $3.4 million in 2011, 2010 and 2009, respectively, primarily related to the sale of gas in underground storage.

Cash and Cash Equivalents

Cash and cash equivalents are defined by the Company as short-term, highly liquid investments that have an original maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash. Management considers cash and cash equivalents to have minimal credit and market risk.

Certain of the Company's cash accounts are zero-balance controlled disbursement accounts that do not have the right of offset against the Company's other cash balances. The Company presents the outstanding checks written against these zero-balance accounts as a component of accounts payable in the accompanying consolidated balance sheets. Outstanding checks included as a component of accounts payable totaled $47.7 million and $23.1 million at December 31, 2011 and 2010, respectively.

Inventory

Inventory recorded in current assets includes $7.8 million at December 31, 2011 and $10.0 million at December 31, 2010, for natural gas in underground storage owned by the Company's E&P segment, and $38.4 million at December 31, 2011 and $25.1 million at December 31, 2010 for tubulars and other equipment used in the E&P segment.

The Company has one natural gas storage facility. The current portion of the natural gas is classified in inventory and carried at the lower of cost or market. The non-current portion of the natural gas is classified in property and equipment and carried at cost. The carrying value of the non-current natural gas is evaluated for recoverability whenever events or changes in circumstances indicate that it may not be recoverable. Withdrawals of current natural gas in underground storage are accounted for by a weighted average cost method whereby natural gas withdrawn from storage is relieved at the weighted average cost of current natural gas remaining in the facility.

Other assets include $19.5 million at December 31, 2011 and $20.6 million at December 31, 2010 for inventory held by the Midstream Services segment consisting primarily of pipe that will be used to construct gathering systems. Tubulars and other equipment are carried at the lower of cost or market and are accounted for by a moving weighted average cost method that is applied within specific classes of inventory items. Purchases of inventory are recorded at cost and inventory is relieved at the weighted average cost of items remaining within a specified class.

 

 Property, Depreciation, Depletion and Amortization

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, less accumulated amortization and related deferred income taxes, are subject to a ceiling test that limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved natural gas and oil reserves discounted at 10 percent (standardized measure) plus the lower of cost or market value of unproved properties. 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 and oil prices may subsequently increase the ceiling. Full cost companies must use the average quoted price from the first day of each month from the previous 12 months, including the impact of derivatives qualifying as cash flow hedges, to calculate the ceiling value of their reserves.

Using the average quoted price from the first day of each month from the previous 12 months for Henry Hub natural gas of $4.12 per MMBtu and $92.71 per barrel for West Texas Intermediate oil, adjusted for market differentials, the Company's net book value of its United States natural gas and oil properties did not exceed the ceiling amount and did not result in a ceiling test impairment at December 31, 2011. Cash flow hedges of natural gas production in place increased this ceiling amount by approximately $262.5 million at December 31, 2011. At December 31, 2010, this ceiling amount of the Company's reserves was calculated based upon average quoted market prices of $4.38 per MMBtu for Henry Hub natural gas and $75.96 per barrel for West Texas Intermediate oil, and at December 31, 2009, the ceiling value of the Company's reserves was calculated based upon year-end quoted market prices of $3.87 per MMBtu for Henry Hub natural gas and $57.65 per barrel for West Texas Intermediate oil. 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. At March 31, 2009, the net capitalized costs of our natural gas and oil properties exceeded the ceiling by approximately $558.3 million (net of tax) and resulted in a non-cash ceiling test impairment in the first quarter of 2009.

All of our costs directly associated with the acquisition and evaluation of properties in New Brunswick, Canada relating to our exploration program at December 31, 2011 were unproved and did not exceed the ceiling amount. If our exploration program in Canada is unsuccessful on all or a portion of these properties, a ceiling test impairment may result in the future.

On December 31, 2009, the Company implemented certain provisions of FASB ASC 932, "Extractive Activities-Oil and Gas," as updated by Accounting Standards Update No. 2010-03, "Extractive Activities-Oil and Gas (Topic 932)" ("FASB ASC 932"), which (a) expand the definition of oil- and gas-producing activities; (b) require energy companies to value their proved reserves by averaging the price from the first day of each month from the previous 12 months instead of using a year-end price; and (c) allow for additional drilling locations to be classified as proved undeveloped reserves assuming such locations are supported by reliable technologies. The Company accounted for the FASB ASC 932 changes as a change in accounting principle that is inseparable from a change in accounting estimate and will account for the change prospectively. The Company is not able to disclose the effects resulting from the implementation of these changes on the amount of proved reserves and disclosed quantities because personnel and time constraints made it infeasible for the Company to perform a second internal reserve estimation process under the prior standards on its approximately 4,850 properties.

Gathering Systems. The Company's investment in gathering systems is primarily related to its Fayetteville Shale play in Arkansas and Marcellus Shale play in Pennsylvania. These assets are being depreciated on a straight-line basis over 25 years.

Capitalized Interest. Interest is capitalized on the cost of unevaluated gas and oil properties that are excluded from amortization and actively being evaluated.

Asset Retirement Obligations. An asset retirement obligation associated with the retirement of a tangible long-lived asset is recognized as a liability in the period incurred or when it becomes determinable, with an associated increase in the carrying amount of the related long-lived asset. The cost of the tangible asset, including the asset retirement cost, is depreciated over the useful life of the asset. The asset retirement obligation is recorded at its estimated fair value and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The Company owns natural gas and oil properties which require expenditures to plug and abandon the wells when reserves in the wells are depleted.

 

 

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to the differences between the financial carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the tax rate in effect for the year in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change. Deferred income taxes are provided to recognize the income tax effect of reporting certain transactions in different years for income tax and financial reporting purposes. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

The Company accounts for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return. The tax benefit from an uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination by taxing authorities based on technical merits of the position. The amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The effective tax rate and the tax basis of assets and liabilities reflect management's estimates of the ultimate outcome of various tax uncertainties.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage defined commodity price risks and does not use them for speculative trading purposes. The Company uses commodity swaps and options contracts to hedge sales of natural gas. Gains and losses resulting from the settlement of hedge contracts have been recognized in gas sales in the consolidated statements of operations when the contracts expire and the related physical transactions of the commodity hedged are recognized. Changes in the fair value of derivative instruments designated as cash flow hedges are reported in other comprehensive income (loss) to the extent that they are effective in offsetting the changes in the cash flows of the hedged item. In contrast, gains and losses from the ineffective portion of swaps and option contacts as well as basis swap contracts that do not qualify for hedge accounting treatment are recognized currently in gas sales in the consolidated statements of operations. Changes in the fair value of derivative instruments designated as fair value hedges as well as the offsetting gain or loss on the hedged item are recognized in earnings immediately. See Note 5 for a discussion of the Company's hedging activities.

Earnings Per Share

Basic earnings per common share attributable to Southwestern Energy stockholders is computed by dividing net income (loss) attributable to Southwestern Energy by the weighted average number of common shares outstanding during each year. The diluted earnings per share attributable to Southwestern Energy stockholders 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 and the vesting of unvested restricted shares of common stock.

For the year ended December 31, 2011, outstanding options for 3,577,104 shares with an average exercise price of $11.78 were included in the calculation of diluted shares. Options for 881,254 shares were excluded from the calculation because they would have had an antidilutive effect. For the year ended December 31, 2010, outstanding options for 4,753,530 shares with an average exercise price of $9.42 were included in the calculation of diluted shares. Options for 548,160 shares were excluded from the calculation because they would have had an antidilutive effect. For the year ended December 31, 2009, 6,683,085 of the Company's outstanding options with an average exercise price of $8.33 were excluded from the calculation of diluted shares because they would have had an antidilutive effect.

For the year ended December 31, 2011,  241,044 shares of restricted stock were included from the calculation of diluted shares. The calculation excluded 135,352 shares of restricted stock because they would have had an antidilutive effect. For the year ended December 31, 2010, 700,512 shares of restricted stock were included from the calculation of diluted shares. The calculation excluded 39,600 shares of restricted stock because they would have had an antidilutive effect. For the year ended December 31, 2009, the number of shares of restricted stock excluded from the calculation of diluted shares was 836,861 because they would have had an antidilutive effect.

Supplemental Disclosures of Cash Flow Information

Supplemental disclosures of cash flow information (in thousands): 

	For the years ended December 31,
	2011	2010	2009
	(in thousands)
Cash paid during the year for interest, net of amounts capitalized	$              19,159	$              24,049	$              16,453
Cash paid (received) during the year for income taxes	4,198	14,368	(41,469)
Increase in noncash property additions	30,389	46,588	28,951

Stock-Based Compensation

The Company accounts for stock-based compensation transactions using a fair value method and recognizes an amount equal to the fair value of the stock options and stock-based payment cost in either the consolidated statement of operations or capitalizes the cost into natural gas and oil properties or gathering systems included in property and equipment. Costs are capitalized when they are directly related to the acquisition, exploration and development activities of the Company's natural gas and oil properties or directly related to the construction of the Company's gathering systems.

Treasury Stock

The Company maintains a non-qualified deferred compensation supplemental retirement savings plan for certain key employees whereby participants may elect to defer and contribute a portion of their compensation to a Rabbi Trust, as permitted by the plan. The Company includes the assets and liability of its supplemental retirement savings plan in its consolidated balance sheet. Shares of the Company's common stock purchased under the non-qualified deferred compensation arrangement are held in the Rabbi Trust and are presented as treasury stock and carried at cost. As of December 31, 2011, 98,889 shares were accounted for as treasury stock, compared to 156,636 shares at December 31, 2010.

Foreign Currency Translation

We have designated the Canadian dollar as the functional currency for our operations in Canada. The cumulative translation effects of translating the accounts from the functional currency into the U.S. dollar at current exchange rates are included as a separate component of stockholders' equity.

New Accounting Standards Implemented in this Report

In January, 2011, we implemented certain provisions of Accounting Standards Update No. 2010-06, "Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements" ("Update 2010-06").  Update 2010-06 requires entities to provide a reconciliation of purchases, sales, issuance and settlements of anything valued with a Level 3 method, which is used to price the hardest to value instruments. The implementation did not have an impact on our results of operations, financial position or cash flows. 

In July, 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income ("Update 2011-05"), which amends Topic 200, Comprehensive Income. Update 2011-05 eliminates the option to present components of 'other comprehensive income' ("OCI") in the statement of changes in stockholders' equity, and requires presentation of total comprehensive income and components of net income in a single statement of comprehensive income, or in two separate, consecutive statements. Update 2011-05 requires presentation of reclassification adjustments for items transferred from OCI to net income on the face of the financial statements where the components of net income and the components of OCI are presented. The amendments do not change current treatment of items in OCI, transfer of items from OCI, or reporting items in OCI net of the related tax impact. Update 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011. The implementation of these changes did not have an impact on the Company's results of operations, financial position or cash flows.

Accounting Standards Not Yet Implemented

In May 2011, the FASB issued guidance on fair value measurement and disclosure requirements outlined in Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820)–Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS ("Update 2011-04"). Update 2011-04 expands existing fair value disclosure requirements, particularly for Level 3 inputs, including: quantitative disclosure of the unobservable inputs and assumptions used in the measurement; description of the valuation processes in place and sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs; the level of items (in the fair value hierarchy) that are not measured at fair value in the balance sheet but whose fair value must be disclosed; and the use of a nonfinancial asset if it differs from the highest and best use assumed in the fair value measurement. The amendments in Update 2011-04 must be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011. The implementation of the disclosure requirement is not expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued guidance on offsetting assets and liabilities and disclosure requirements in Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities ("Update 2011-11"). Update 2011-11 requires that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transaction s subject to an agreement similar to a master netting agreement. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. Update 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The implementation of the disclosure requirement is not expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued guidance on accumulated other comprehensive income in Accounting Standards Update No. 2011-12,Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 ("Update 2011-12").  Update 2011-12 defers the specific requirement to present items that are classified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income, as promulgated under Update 2011-05.  Update 2011-12 is effective for annual reporting periods beginning on or after December 15, 2011, and interim periods within those annual periods.  The Company is currently evaluating the impact that the implementation of the disclosure requirement is expected to have on the Company's consolidated results of operations, financial position or cash flows. 

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Retirement and Employee Benefit Plans (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2012
Contribution expense	$ 1,900,000	$ 900,000	$ 800,000
Contributions capitalized	3,800,000	4,200,000	3,300,000
Prior service costs				300,000
Net loss				1,200,000
Transition obligation costs				100,000
Pension Benefits [Member]
Change in accumulated other comprehensive income (loss)	(5,400,000)	(2,400,000)
Change in accumulated other comprehensive income (loss) after tax	(3,300,000)	(1,200,000)
Employer contributions	12,500,000
Company's expected contribution				12,700,000
Other Postretirement Benefits [Member]
Change in accumulated other comprehensive income (loss)	(200,000)	(400,000)
Change in accumulated other comprehensive income (loss) after tax	(100,000)	(200,000)
Employer contributions	100,000
Company's expected contribution				200,000
United States Postretirement Benefit Plans of US Entity, Defined Benefit [Member]
Defined benefit plan included in accumulated other comprehensive income (loss)	(26,200,000)	(20,500,000)
Defined benefit plan included in accumulated other comprehensive income (loss) after tax	$ (15,900,000)	$ (12,500,000)

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Natural Gas and Oil Producing Activities (Capitalized Costs Incurred in Natural Gas and Oil Property Acquisition, Exploration and Development Activities) (Details) (USD $)	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Proved property acquisition costs	$ 17,000		$ 0		$ 4,372,000
Unproved property acquisition costs	262,886,000	[1]	229,909,000	[1]	115,217,000	[1]
Exploration costs	63,419,000	[2]	27,062,000	[2]	52,178,000	[2]
Development costs	1,633,784,000		1,524,453,000		1,358,109,000
Capitalized costs incurred	1,960,106,000		1,781,424,000		1,529,876,000
Full cost pool amortization per Mcfe	1.30		1.34		1.51
Capitalized interest based on weighted average cost of borrowings	43,400,000		32,900,000		40,200,000
Acquisition, exploration and development activities	147,700,000		139,200,000		112,900,000
Exploration Program in Canada [Member]
Unproved property acquisition costs	200,000
Exploration costs	$ 2,500,000

[1] (1) Includes $0.2 million and $2.5 million, in 2011 and 2010, respectively, related to our exploration program in New Brunswick, Canada.

[2] (2) Includes $18.4 million and $8.2 million in 2011 and 2010, respectively, related to our exploration program in New Brunswick, Canada.

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

Carrying Amount and Estimated Fair Values of Financial Instruments

	December 31, 2011		December 31, 2010
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
	(in thousands)
Cash and cash equivalents	$          15,627	$         15,627	$          16,055	$          16,055
Unsecured revolving credit facility	$        671,500	$       671,500	$        421,200	$        421,200
Senior notes	$        671,800	$       773,578	$        673,000	$        761,372
Derivative instruments, net	$        704,830	$        704,830	$        160,452	$        160,452

Summary Assets and Liabilities Measured at Fair Value on Recurring Basis

	December 31, 2011
	Fair Value Measurements Using:
	Quoted Prices	Significant
	in Active	Other	Significant
	Markets	Observable Inputs	Unobservable Inputs	Assets (Liabilities)
	(Level 1)	(Level 2)	(Level 3)	at Fair Value
Derivative assets	$                      0	$                 534,560	$                     182,783	$              717,343
Derivative liabilities	0	(11,849)	(664)	(12,513)
Total	$                      0	$                 522,711	$                     182,119	$              704,830
	December 31, 2010
	Fair Value Measurements Using:
	Quoted Prices	Significant
	in Active	Other	Significant
	Markets	Observable Inputs	Unobservable Inputs	Assets (Liabilities)
	(Level 1)	(Level 2)	(Level 3)	at Fair Value
Derivative assets	$                      0	$                   86,883	$                    121,442	$              208,325
Derivative liabilities	0	(24,108)	(23,765)	(47,873)
Total	$                      0	$                   62,775	$                      97,677	$              160,452

Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3), Reconciliation

	For the years ended December 31,
	2011	2010
	(in thousands)
Balance at beginning of period	$           97,677	$           24,720
Total gains or losses (realized/unrealized):
Included in earnings	67,998	68,111
Included in other comprehensive income	79,215	63,522
Purchases, issuances and settlements
Purchases	—	—
Issuances	—	—
Settlements	(62,913)	(58,676)
Transfers into/out of Level 3	142	—
Balance at end of period	$         182,119	$           97,677
Change in unrealized gain (loss) included in earnings relating to derivatives still held as of December 31	$              5,085	$              9,435

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Derivatives and Risk Management (Tables)

12 Months Ended

Dec. 31, 2011

Derivatives And Risk Management [Abstract]

Balance Sheet Classification of Derivative Financial Instruments

	Derivative Assets
	December 31, 2011		December 31, 2010
	Balance Sheet Classification	Fair Value	Balance Sheet Classification	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Fixed and floating price swaps	Hedging asset	$        333,479	Hedging asset	$          81,797
Costless-collars	Hedging asset	179,080	Hedging asset	48,582
Fixed and floating price swaps	Other assets	201,081	Other assets	5,086
Costless-collars	Other assets	0	Other assets	72,827
Total derivatives designated as hedging instruments		$        713,640		$        208,292
Derivatives not designated as hedging instruments:
Basis swaps	Hedging asset	$             1,906	Hedging asset	$                 33
Basis swaps	Other assets	1,797	Other assets	0
Total derivatives not designated as hedging instruments		$             3,703		$                 33
Total derivative assets		$        717,343		$        208,325
	Derivative Liabilities
	December 31, 2011		December 31, 2010
	Balance Sheet Classification	Fair Value	Balance Sheet Classification	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Fixed and floating price swaps	Hedging liability	$          11,849	Hedging liability	$            1,774
Costless-collars	Hedging liability	209	Hedging liability	3,903
Fixed and floating price swaps	Long-term hedging liability	0	Long-term hedging liability	22,334
Costless-collars	Long-term hedging liability	0	Long-term hedging liability	17,854
Total derivatives designated as hedging instruments		$          12,058		$          45,865
Derivatives not designated as hedging instruments:
Basis swaps	Hedging liability	$               400	Hedging liability	$            2,008
Basis swaps	Long-term hedging liability	55	Long-term hedging liability	0
Total derivatives not designated as hedging instruments		$               455		$            2,008
Total derivative liabilities		$          12,513		$          47,873

Cash Flow Hedges, Volumes of Natural Gas Production (in Bcf)

Year:	Fixed price swaps	Costless-collars
2012	185.9	80.5
2013	185.2	0

Before Tax Effect of Cash Flow Hedges on Consolidated Financial Statements

		Gain Recognized in Other Comprehensive Income (Effective Portion)
		For the years ended
		December 31,
Derivative Instrument		2011	2010
		(in thousands)
Fixed price swaps		$    714,740	$    166,722
Costless-collars		$    144,126	$    132,438
	Classification of Gain Reclassified from Accumulated Other	Gain Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)
	Comprehensive Income	For the years ended
	into Earnings	December 31,
Derivative Instrument	(Effective Portion)	2011	2010
		(in thousands)
Fixed price swaps	Gas Sales	$    256,229	$    230,707
Costless-collars	Gas Sales	$      65,047	$      70,775
		Loss Recognized in Earnings (Ineffective Portion)
	Classification of Loss	For the years ended
	Recognized in Earnings	December 31,
Derivative Instrument	(Ineffective Portion)	2011	2010
		(in thousands)
Fixed price swaps	Gas Sales	$      (4,018)	$       (4,769)
Costless-collars	Gas Sales	$         (137)	$       (1,999)

Before Tax Effect of Basis Swaps Not Qualifying for Hedge Accounting

		Unrealized Gain Recognized in Earnings
	Income Statement	For the years ended
	Classification	December 31,
Derivative Instrument	of Unrealized Gain	2011	2010
		(in thousands)
Basis swaps	Gas Sales	$        5,222	$      11,434
		Realized Loss Recognized in Earnings
	Income Statement	For the years ended
	Classification	December 31,
Derivative Instrument	of Realized Loss	2011	2010
		(in thousands)
Basis swaps	Gas Sales	$      (2,135)	$     (12,098)

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Commitments and Contingencies (Details)

12 Months Ended

12 Months Ended

12 Months Ended

Dec. 31, 2011

USD ($)

Dec. 31, 2011

Sixth Amended Petition [Member]

USD ($)

Dec. 31, 2010

Seventh Amended Petition [Member]

USD ($)

Dec. 31, 2011

Post Verdict Motions [Member]

USD ($)

Dec. 31, 2011

Compressors Aircraft Office Space and Equipment [Member]

USD ($)

Dec. 31, 2011

Midstream Services and E&P [Member]

USD ($)

Dec. 31, 2011

SES [Member]

USD ($)

Dec. 31, 2011

Canada [Member]

USD ($)

Dec. 31, 2011

Canada [Member]

CAD

Future Demand Transportation Charges Due 2012

$ 212,200,000

Future Demand Transportation Charges Due 2013

218,800,000

Future Demand Transportation Charges Due 2014

234,300,000

Future Demand Transportation Charges Due 2015

233,700,000

Future Demand Transportation Charges Due 2016

236,200,000

Future Demand Transportation Charges Due After 2016

960,500,000

Aggregate annual lease payment for the 14 leased drilling rigs and equipment

19,400,000

Operating leases, future minimum payments due 2012

69,900,000

42,100,000

Operating leases, future minimum payments due 2013

65,000,000

30,000,000

Operating leases, future minimum payments due 2014

57,700,000

15,700,000

Operating leases, future minimum payments due 2015

33,500,000

9,600,000

Operating leases, future minimum payments due 2016

25,900,000

8,000,000

Operating leases, future minimum payments due Thereafter

16,200,000

1,700,000

Dekatherm per day of capacity

100,000

Obligations for demand and similar charges under transportation agreements

2,100,000,000

ExpectedCapacity

275,000

Unrecorded capital investments obligation, Exploration program acres coverage

2.5

Unrecorded capital investments obligation

47,000,000

Unrecorded promissory note payable

44,500,000

Capital investment related to companys E&P segment related to Canada

28,500,000

Litigation, Monetary damages claimed by plaintiffs

55,000,000

46,000,000

Litigation, Management's assessment

We are subject to various litigation, claims and proceedings that have arisen in the ordinary course of business. Management believes, individually or in aggregate, such litigation, claims and proceedings will not have a material adverse impact on our financial position or our results of operations but these matters are subject to inherent uncertainties and management's view may change in the future. If an unfavorable final outcome were to occur, there exists the possibility of a material impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. We accrue for such items when a liability is both probable and the amount can be reasonably estimated.

Litigation settlement, gross

11,400,000

Litigation, portion of profits considered for disgorgement

381,500,000

Disgorgement damages awarded in favor of the plaintiff

11,400,000

Disgorgement damages awarded in favor of the plantiff and intervenor

23,900,000

Percentage of attorney fees recoverable by plantiff

40

Attorney fees due to plantiff

8,900,000

Number of wells for constructive trust profits

143

Number of horizontal wells operated by SEECO in Arkansas

27

Value of SEPCO's supersedeas bond

14,100,000

Actual damages covered by SEPCO's supersedeas bond

11,400,000

Pre-judgement interest covered by SEPCO's supersedeas bond

1,300,000

Post-judgement interest covered by SEPCO's supersedeas bond

1,300,000

Litigation, SEPCO's estimated gross liability including interest and attorney's fees.

$ 44,200,000

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Natural Gas and Oil Producing Activities (Results of Operations from Natural Gas and Oil Producing Activities) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Natural Gas And Oil Producing Activities Abstract
Sales	$ 2,100,488	$ 1,890,444	$ 1,593,231
Production (lifting) costs	(469,153)	(376,939)	(259,588)
Depreciation, depletion and amortization	(666,107)	(561,003)	(474,014)
Impairment of natural gas and oil properties	0	0	(907,812)
Results of operations - income before income taxes	965,228	952,502	(48,183)
Provision (benefit) for income taxes	376,049	371,281	(15,650)
Results of operations	$ 589,179	$ 581,221	$ (32,533)

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Debt (Tables)

Dec. 31, 2011

Debt [Abstract]

ComponentsOfDebt

	2011		2010
	(in thousands)
Short-term debt:
7.15% Senior Notes due 2018	$                1,200	$                1,200
Total short-term debt	1,200	1,200
Long-term debt:
Variable rate (2.276% at December 31, 2011 and 0.887% at December 31, 2010) unsecured revolving credit facility, expires February 2016	671,500	421,200
7.5% Senior Notes due 2018	600,000	600,000
7.35% Senior Notes due 2017	15,000	15,000
7.125% Senior Notes due 2017	25,000	25,000
7.15% Senior Notes due 2018	30,600	31,800
	1,342,100	1,093,000
Total debt	$        1,343,300	$        1,094,200

Schedule Of Long Term Debt Maturities

The following is a summary of scheduled long-term debt maturities by year as of December 31, 2011 (in thousands):

2012	$                1,200
2013	1,200
2014	1,200
2015	1,200
2016	672,700
Thereafter	665,800
	$       1,343,300

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income Taxes

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes included the following components:

	2011	2010	2009
	(in thousands)
Current:
Federal	$       3,378	$       10,421	$      (65,309)
State	820	1,518	340
	4,198	11,939	(64,969)
Deferred:
Federal	345,922	319,279	48,308
State	60,941	59,982	298
Foreign	2,160	459	0
	409,023	379,720	48,606
Provision (benefit) for income taxes	$     413,221	$     391,659	$      (16,363)

Reconciliation of Provision for Income Taxes

	2011	2010	2009
	(in thousands)
Expected provision (benefit) at federal statutory rate	$     367,854	$     348,632	$      (18,205)
Increase (decrease) resulting from:
State income taxes, net of federal income tax effect	40,145	39,975	415
Nondeductible expenses	1,244	660	1,497
Other	3,978	2,392	(70)
Provision (benefit) for income taxes	$     413,221	$     391,659	$      (16,363)

Net Deferred Tax Liability

The components of the Company's net deferred tax liability as of December 31, 2011 and 2010 were as follows:

	2011	2010
	(in thousands)
Deferred tax liabilities:
Differences between book and tax basis of property	$    1,916,619	$    1,411,240
Cash flow hedges	276,063	61,394
Other	15,755	14,122
	2,208,437	1,486,756
Deferred tax assets:
Accrued compensation	30,316	16,279
Alternative minimum tax credit carryforward	73,516	70,138
Stored natural gas	9,053	7,145
Accrued pension costs	3,982	6,227
Asset retirement obligations	13,188	10,848
Net operating loss carryforward	287,830	192,086
Other	9,591	9,652
	427,476	312,375
Net deferred tax liability	$    1,780,961	$    1,174,381

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Reclassification to earnings tax	$ (126.6)	$ (118.9)	$ (234.1)
Ineffectiveness tax	1.6	2.6	(3.8)
Change in fair value of derivative instruments tax	338.4	119.5	137.7
Change in value of pension and other postretirement liabilities, current period net loss tax	(2.7)	(2.0)	(0.2)
Amortization of prior service cost included in net periodic pension cost, tax	0.5	0.6	0.5
Change in value of pension and other postretirement liabilities, current period service cost tax	$ 0	$ 0.1	$ (0.1)

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Asset Retirement Obligations (Tables)

12 Months Ended

Dec. 31, 2011

Asset Retirement Obligation

Components of Asset Retirement Obligation

	2011	2010
	(in thousands)
Asset retirement obligation at January 1	$        27,786	$        22,972
Accretion of discount	1,361	1,095
Obligations incurred	4,304	6,926
Obligations settled/removed	(883)	(477)
Revisions of estimates	5,125	(2,730)
Asset retirement obligation at December 31	$        37,693	$        27,786
Current liability	1,539	1,829
Long-term liability	36,154	25,957
Asset retirement obligation at December 31	$        37,693	$        27,786

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Prepaid Expenses (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Prepaid Expenses [Abstract]
Prepaid drilling costs	$ 42,775	$ 21,997
Prepaid insurance	7,275	7,690
Total	$ 50,050	$ 29,687

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Derivatives and Risk Management (Before Tax Effect of Derivatives on Consolidated Financial Statements) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Fixed Price Swaps [Member]
Derivative Instruments, Gain Recognized in Other Comprehensive Income, Effective Portion	$ 714,740	$ 166,722
Derivative Instruments, Gain Reclassified from Accumulated Other Comprehensive Income into Earnings, Effective Portion	256,229	230,707
Derivative Instruments, Gain (Loss) Recognized in Earnings, Ineffective Portion	(4,018)	(4,769)
Costless Collar [Member]
Derivative Instruments, Gain Recognized in Other Comprehensive Income, Effective Portion	144,126	132,438
Derivative Instruments, Gain Reclassified from Accumulated Other Comprehensive Income into Earnings, Effective Portion	65,047	70,775
Derivative Instruments, Gain (Loss) Recognized in Earnings, Ineffective Portion	(137)	(1,999)
Gas Sales [Member]
Derivative Instruments, Unrealized Gain (Loss) Recognized in Earnings	5,222	11,434
Derivative Instruments, Realized Gain (Loss) Recognized in Earnings	$ (2,135)	$ (12,098)

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Retirement and Employee Benefit Plans (Plan Assets Allocation to any Asset Class Falls Outside of the Specified Range) (Details)	12 Months Ended
	Dec. 31, 2011
Target fixed income and cash and cash equivalents	40.00%
Total target asset allocations	100.00%
Actual fixed income and cash and cash equivalents	40.00%
Total actual asset allocations	100.00%
Large Cap Growth Equity [Member]
Target equity securities	6.00%
Actual equity securities	6.00%
Large Cap Value Equity [Member]
Target equity securities	6.00%
Actual equity securities	5.00%
Large Cap Core Equity [Member]
Target equity securities	15.00%
Actual equity securities	16.00%
Small Cap Equity [Member]
Target equity securities	3.00%
Actual equity securities	3.00%
International Equity [Member]
Target equity securities	25.00%
Actual equity securities	25.00%
Emerging Markets Equity [Member]
Target equity securities	5.00%
Actual equity securities	5.00%

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Operating Revenues:
Gas sales	$ 2,080,241		$ 1,856,241		$ 1,578,256
Gas marketing	714,123		615,913		488,663
Oil sales	9,085		13,111		6,843
Gas gathering	149,973		122,912		74,281
Other	(516)		2,486		(2,264)
Total Operating Revenues	2,952,906		2,610,663		2,145,779
Operating Costs and Expenses:
Gas purchases - Midstream Services	709,091		611,161		482,836
Operating expenses	240,944		191,771		136,541
General and administrative expenses	158,041		145,563		122,618
Depreciation, depletion and amortization	704,511		590,332		493,658
Impairment of natural gas and oil properties	0		0		907,812
Taxes, other than income taxes	65,518		50,608		37,280
Total operating costs and expenses	1,878,105		1,589,435		2,180,745
Operating Income (Loss)	1,074,801		1,021,228		(34,966)
Interest Expense:
Interest on debt	65,421		57,144		55,581
Other interest charges	4,306		1,935		3,266
Interest capitalized	(45,652)		(32,916)		(40,209)
Total Interest Expense	24,075	[1]	26,163	[1]	18,638	[1]
Other Income, Net	264		427		1,449
Income (Loss) Before Income Taxes	1,050,990		995,492		(52,155)
Provision (Benefit) for Income Taxes:
Current	4,198		11,939		(64,969)
Deferred	409,023		379,720		48,606
Provision (benefit) for income taxes	413,221	[1]	391,659	[1]	(16,363)
Net Income (Loss)	637,769		603,833		(35,792)
Less: Net Loss Attributable to Noncontrolling Interest	0		(285)		(142)
Net Income (Loss) Attributable to Southwestern Energy	$ 637,769		$ 604,118		$ (35,650)
Earnings Per Share:
Net income (loss) attributable to Southwestern Energy stockholders - Basic	$ 1.84		$ 1.75		$ (0.10)
Net income (loss) attributable to Southwestern Energy stockholders - Diluted	$ 1.82		$ 1.73		$ (0.10)
Weighted Average Common Shares Outstanding:
Basic	347,205,316		345,581,568		343,420,568
Effect of:
Stock options	2,475,053		3,512,241		0
Restricted stock awards	241,044		216,857		0
Diluted	349,921,413		349,310,666		343,420,568

[1] (1) Interest income, interest expense and the provision (benefit) for income taxes by segment are an allocation of corporate amounts as cash equivalents, debt and income tax expense allocated as they are incurred at the corporate level.

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Natural Gas and Oil Producing Activities (Changes in Proved Natural Gas and Oil Reserves) (Details)	12 Months Ended
	Dec. 31, 2011 MMcf	Dec. 31, 2010 MMcf	Dec. 31, 2009 MMcf
Natural Gas [Member]
Proved reserves, beginning of year	4,929,980	3,650,303	2,175,528
Revisions of previous estimates	34,505	309,292	94,930
Extensions, discoveries and other additions	1,459,428	1,429,439	1,683,264
Production	(499,433)	(403,636)	(299,698)
Acquisition of reserves in place	13	0	1,795
Disposition of reserves in place	(37,286)	(55,418)	(5,516)
Proved reserves, end of year	5,887,207	4,929,980	3,650,303
Proved Developed Reserves Abstract
Beginning of year	2,687,238	1,972,767	1,336,370
End of year	3,254,018	2,687,238	1,972,767
Proved Undeveloped Reserves Abstract
Beginning of year	2,242,742	1,677,536	839,158
End of year	2,633,189	2,242,742	1,677,536
Oil [Member]
Proved reserves, beginning of year	1,219	1,059	1,507
Revisions of previous estimates	(125)	50	(346)
Extensions, discoveries and other additions	2	281	22
Production	(97)	(171)	(124)
Acquisition of reserves in place	0	0	0
Disposition of reserves in place	(3)	0	0
Proved reserves, end of year	996	1,219	1,059
Proved Developed Reserves Abstract
Beginning of year	1,173	1,028	1,352
End of year	983	1,173	1,028
Proved Undeveloped Reserves Abstract
Beginning of year	46	31	155
End of year	13	46	31

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $) In Thousands, unless otherwise specified	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income	Common Stock in Treasury	Noncontrolling Interest	Total
Balance at Dec. 31, 2008	$ 3,436	$ 811,492	$ 1,449,977	$ 247,665	$ (4,740)	$ 10,133	$ 2,517,963
Balance, shares at Dec. 31, 2008	343,625
Comprehensive income (loss):
Net income (loss)	0	0	(35,650)	0	0	(142)	(35,792)
Other comprehensive income (loss)	0	0	0	(163,389)	0		(163,389)
Total comprehensive income (loss)						(142)	(199,181)
Stock-based compensation	0	16,003	0	0	0		16,003
Exercise of stock options, shares	2,153
Exercise of stock options	22	5,733	0	0	0		5,755
Issuance of restricted stock, shares	312
Issuance of restricted stock	3	(3)	0	0	0		0
Cancellation of restricted stock, shares	(10)
Cancellation of restricted stock	0	0	0	0	0		0
Issuance of stock awards, shares	1
Issuance of stock awards	0	65	0	0	0		65
Treasury stock - non-qualified plan	0	204	0	0	407		611
Distributions to noncontrolling interest in partnership	0	0	0	0	0	(235)	(235)
Balance at Dec. 31, 2009	3,461	833,494	1,414,327	84,276	(4,333)	9,756	2,340,981
Balance, shares at Dec. 31, 2009	346,081
Comprehensive income (loss):
Net income (loss)	0	0	604,118	0	0	(285)	603,833
Other comprehensive income (loss)	0	0	0	(301)	0	0	(301)
Total comprehensive income (loss)						(285)	603,532
Stock-based compensation	0	16,569	0	0	0	0	16,569
Exercise of stock options, shares	1,293
Exercise of stock options	12	3,885	0	0	0	0	3,897
Issuance of restricted stock, shares	392
Issuance of restricted stock	4	(4)	0	0	0	0	0
Cancellation of restricted stock, shares	(30)
Cancellation of restricted stock	0	0	0	0	0	0	0
Tax withholding - stock compensation, shares	(3)
Tax withholding - stock compensation	0	(112)	0	0	0	0	(112)
Issuance of stock awards, shares	1
Issuance of stock awards	0	37	0	0	0	0	37
Treasury stock - non-qualified plan	0	771	0	0	889	0	1,660
Distributions to noncontrolling interest in partnership	0	0	0	0	0	(188)	(188)
Purchase of noncontrolling interest in partnership	0	7,783	0	0	0	(9,283)	(1,500)
Balance at Dec. 31, 2010	3,477	862,423	2,018,445	83,975	(3,444)	0	2,964,876
Balance, shares at Dec. 31, 2010	347,734
Comprehensive income (loss):
Net income (loss)	0	0	637,769	0	0	0	637,769
Other comprehensive income (loss)	0	0	0	324,453	0	0	324,453
Total comprehensive income (loss)						0	962,222
Tax benefit for stock-based compensation	0	14,626	0	0	0	0	14,626
Stock-based compensation	0	19,036	0	0	0	0	19,036
Exercise of stock options, shares	851
Exercise of stock options	9	6,403	0	0	0	0	6,412
Issuance of restricted stock, shares	532
Issuance of restricted stock	5	(5)	0	0	0	0	0
Cancellation of restricted stock, shares	(52)
Cancellation of restricted stock	0	1	0	0	0	0	1
Tax withholding - stock compensation, shares	(7)
Tax withholding - stock compensation		(262)	0	0	0	0	(262)
Issuance of stock awards, shares	1
Issuance of stock awards	0	42	0	0	0	0	42
Treasury stock - non-qualified plan	0	1,135	0	0	1,216	0	2,351
Balance at Dec. 31, 2011	$ 3,491	$ 903,399	$ 2,656,214	$ 408,428	$ (2,228)	$ 0	$ 3,969,304
Balance, shares at Dec. 31, 2011	349,059

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Income Taxes (Reconciliation of Provision for Income Taxes) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Income Taxes
Expected provision (benefit) at federal statutory rate	$ 367,854		$ 348,632		$ (18,205)
Increase (decrease) resulting from:
State income taxes, net of federal income tax effect	40,145		39,975		415
Non-deductible expenses	1,244		660		1,497
Other	3,978		2,392		(70)
Provision (benefit) for income taxes	$ 413,221	[1]	$ 391,659	[1]	$ (16,363)

[1] (1) Interest income, interest expense and the provision (benefit) for income taxes by segment are an allocation of corporate amounts as cash equivalents, debt and income tax expense allocated as they are incurred at the corporate level.

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2011

Segment Information [Abstract]

Summary Financial Information for Company's Reportable Segments Table

	Exploration
	And		Midstream
	Production		Services	Other	Total
	(in thousands)
2011
Revenues from external customers	$   2,088,763		$       864,096	$                 47	$    2,952,906
Intersegment revenues	11,725		1,995,423	3,221	2,010,369
Operating income	825,138		247,952	1,711	1,074,801
Other income, net(1)	328		(91)	27	264
Depreciation, depletion and amortization expense	666,125		37,261	1,125	704,511
Interest expense(1)	9,026		15,049	0	24,075
Provision for income taxes(1)	322,714		90,221	286	413,221
Assets	6,547,117	(2)	1,119,861	235,919	7,902,897
Capital investments(3)	1,977,493		160,776	68,905	2,207,174
2010
Revenues from external customers	$   1,871,835		$       738,828	$                 0	$    2,610,663
Intersegment revenues	18,609		1,715,012	984	1,734,605
Operating income	829,462		191,566	200	1,021,228
Other income, net(1)	235		179	13	427
Depreciation, depletion and amortization expense	561,018		28,765	549	590,332
Interest expense(1)	7,888		18,275	0	26,163
Provision for income taxes(1)	323,748		67,834	77	391,659
Assets	4,849,478	(2)	1,016,563	151,422	6,017,463
Capital investments(3)	1,775,518		271,316	73,231	2,120,065
2009
Revenues from external customers	$   1,582,596		$       562,944	$               239	$    2,145,779
Intersegment revenues	10,635		1,040,388	448	1,051,471
Operating income (loss)	(157,725)		122,620	139	(34,966)
Other income, net(1)	1,406		34	9	1,449
Depreciation, depletion and amortization expense	474,014		19,213	431	493,658
Impairment of natural gas and oil properties	907,812		0	0	907,812
Interest expense(1)	15,237		3,401	0	18,638
Provision (benefit) for income taxes(1)	(61,725)		45,303	59	(16,363)
Assets	3,904,739	(2)	767,346	98,165	4,770,250
Capital investments(3)	1,565,450		214,208	29,459	1,809,117

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Retirement and Employee Benefit Plans (Pension and Other Postretirement Benefit Costs) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Pension Benefits [Member]
Service cost	$ 9,323	$ 7,096	$ 5,148
Interest cost	3,671	3,249	2,874
Expected return on plan assets	(4,398)	(3,503)	(2,809)
Amortization of transition obligation	0	0	0
Amortization of prior service cost	344	346	334
Amortization of net loss	856	806	846
Net periodic benefit cost	9,796	7,994	6,393
Settlements and curtailments	0	223	0
Total benefit cost	9,796	8,217	6,393
Other Postretirement Benefits [Member]
Service cost	1,354	1,089	696
Interest cost	252	195	136
Expected return on plan assets	0	0	0
Amortization of transition obligation	64	65	65
Amortization of prior service cost	14	14	14
Amortization of net loss	11	21	7
Net periodic benefit cost	1,695	1,384	918
Settlements and curtailments	0	0	0
Total benefit cost	$ 1,695	$ 1,384	$ 918

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Quarterly Results (Unaudited)

12 Months Ended

Dec. 31, 2011

Quarterly Results (Unaudited)

Quarterly Results (Unaudited)

(14) QUARTERLY RESULTS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended December 31, 2011 and 2010:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
	(in thousands, except per share amounts)
	2011
Operating revenues	$    676,335	$   765,166	$   767,255	$    744,150
Operating income	232,651	282,542	295,718	263,890
Net income	136,609	167,454	175,173	158,533
Net income attributable to Southwestern Energy	136,609	167,454	175,173	158,533
Earnings per share attributable to Southwestern Energy stockholders – Basic	0.39	0.48	0.50	0.47
Earnings per share attributable to Southwestern Energy stockholders – Diluted	0.39	0.48	0.50	0.45
	2010
Operating revenues	$     668,117	$     589,943	$     682,172	$     670,431
Operating income (loss)	288,090	206,317	270,136	256,685
Net income (loss)	171,768	122,009	160,638	149,418
Net income (loss) attributable to Southwestern Energy	171,797	122,069	160,741	149,511
Earnings per share attributable to Southwestern Energy stockholders – Basic	0.50	0.35	0.47	0.43
Earnings per share attributable to Southwestern Energy stockholders – Diluted	0.49	0.35	0.46	0.43

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Quarterly Results (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2011

Quarterly Results (Unaudited)

Schedule of Quarterly Financial Information [Table Text Block]

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
	(in thousands, except per share amounts)
	2011
Operating revenues	$    676,335	$   765,166	$   767,255	$    744,150
Operating income	232,651	282,542	295,718	263,890
Net income	136,609	167,454	175,173	158,533
Net income attributable to Southwestern Energy	136,609	167,454	175,173	158,533
Earnings per share attributable to Southwestern Energy stockholders – Basic	0.39	0.48	0.50	0.47
Earnings per share attributable to Southwestern Energy stockholders – Diluted	0.39	0.48	0.50	0.45
	2010
Operating revenues	$     668,117	$     589,943	$     682,172	$     670,431
Operating income (loss)	288,090	206,317	270,136	256,685
Net income (loss)	171,768	122,009	160,638	149,418
Net income (loss) attributable to Southwestern Energy	171,797	122,069	160,741	149,511
Earnings per share attributable to Southwestern Energy stockholders – Basic	0.50	0.35	0.47	0.43
Earnings per share attributable to Southwestern Energy stockholders – Diluted	0.49	0.35	0.46	0.43

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Basis of Presentation and New Accounting Standards (Policy)

12 Months Ended

Dec. 31, 2011

Basis of Presentation and New Accounting Standards [Abstract]

Nature of Operations

        Southwestern Energy Company (including its subsidiaries, collectively, "Southwestern" or the "Company") is an independent energy company engaged in natural gas and oil exploration, development and production. The Company engages in natural gas and oil exploration and production, natural gas gathering and natural gas marketing through its subsidiaries. Southwestern's exploration, development and production ("E&P") activities are principally focused within the United States on development of an unconventional gas reservoir located on the Arkansas side of the Arkoma Basin, which the Company refers to as the Fayetteville Shale play.  The Company is also actively engaged in exploration and production activities in Pennsylvania, where we are targeting the unconventional gas reservoir known as the Marcellus Shale, and to a lesser extent in Texas and in Arkansas and Oklahoma in the Arkoma Basin.  The Company has recently commenced exploration operations in southern Arkansas and northern Louisiana testing a new unconventional horizontal oil play targeting the Lower Smackover Brown Dense formation.  Southwestern's natural gas gathering and marketing (Midstream Services) activities primarily support the Company's E&P activities in Arkansas, Pennsylvania and Texas.

Basis of Presentation

The consolidated financial statements included in this Annual Report on Form 10-K present the Company's financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.The Company evaluates subsequent events through the date the financial statements are issued.

Principles of Consolidation

The consolidated financial statements include the accounts of Southwestern and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In 2010, the Company purchased the non-controlling interest in Overton Partners, L.P.

Revenue Recognition

Gas and oil sales. Gas sales and oil sales are recognized when the products are sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is reasonably assured. The Company uses the entitlement method that requires revenue recognition for the Company's net revenue interest of sales from its properties. Accordingly, gas sales and oil sales are not recognized for deliveries in excess of the Company's net revenue interest, while gas sales and oil sales are recognized for any under delivered volumes. Production imbalances are generally recorded at estimated sales prices of the anticipated future settlements of the imbalances. At December 31, 2011, the Company had overproduction of 6.1 Bcf valued at $22.5 million and underproduction of 6.4 Bcf valued at $22.9 million. At December 31, 2010, the Company had overproduction of 3.9 Bcf valued at $13.3 million and underproduction of 3.7 Bcf valued at $12.8 million.

Gas marketing. The Company generally markets its natural gas, as well as some gas produced by third parties, to brokers, local distribution companies and end-users, pursuant to a variety of contracts. Gas marketing revenues are recognized when delivery of natural gas has occurred, title has transferred, the price is fixed or determinable and collectability of the revenue is reasonably assured.

Gas gathering. The Company gathers its natural gas, as well as some gas produced by third parties, pursuant to a variety of contracts. Gas gathering revenues are recognized when the service is performed, the price is fixed or determinable and collectability of the revenue is reasonably assured.

Other. The Company maintains an underground gas storage facility and generally sells natural gas from its storage facility during the winter gas withdrawal season. Revenue is recognized on natural gas storage sales when the natural gas is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is reasonably assured. Other revenues include gains of $0.9 million, $2.5 million and $3.4 million in 2011, 2010 and 2009, respectively, primarily related to the sale of gas in underground storage.

Cash and Cash Equivalents

Cash and cash equivalents are defined by the Company as short-term, highly liquid investments that have an original maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash. Management considers cash and cash equivalents to have minimal credit and market risk.

Certain of the Company's cash accounts are zero-balance controlled disbursement accounts that do not have the right of offset against the Company's other cash balances. The Company presents the outstanding checks written against these zero-balance accounts as a component of accounts payable in the accompanying consolidated balance sheets. Outstanding checks included as a component of accounts payable totaled $47.7 million and $23.1 million at December 31, 2011 and 2010, respectively.

Inventory

Inventory recorded in current assets includes $7.8 million at December 31, 2011 and $10.0 million at December 31, 2010, for natural gas in underground storage owned by the Company's E&P segment, and $38.4 million at December 31, 2011 and $25.1 million at December 31, 2010 for tubulars and other equipment used in the E&P segment.

The Company has one natural gas storage facility. The current portion of the natural gas is classified in inventory and carried at the lower of cost or market. The non-current portion of the natural gas is classified in property and equipment and carried at cost. The carrying value of the non-current natural gas is evaluated for recoverability whenever events or changes in circumstances indicate that it may not be recoverable. Withdrawals of current natural gas in underground storage are accounted for by a weighted average cost method whereby natural gas withdrawn from storage is relieved at the weighted average cost of current natural gas remaining in the facility.

Other assets include $19.5 million at December 31, 2011 and $20.6 million at December 31, 2010 for inventory held by the Midstream Services segment consisting primarily of pipe that will be used to construct gathering systems. Tubulars and other equipment are carried at the lower of cost or market and are accounted for by a moving weighted average cost method that is applied within specific classes of inventory items. Purchases of inventory are recorded at cost and inventory is relieved at the weighted average cost of items remaining within a specified class.

 

Property, Depreciation, Depletion and Amortization

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, less accumulated amortization and related deferred income taxes, are subject to a ceiling test that limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved natural gas and oil reserves discounted at 10 percent (standardized measure) plus the lower of cost or market value of unproved properties. 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 and oil prices may subsequently increase the ceiling. Full cost companies must use the average quoted price from the first day of each month from the previous 12 months, including the impact of derivatives qualifying as cash flow hedges, to calculate the ceiling value of their reserves.

Using the average quoted price from the first day of each month from the previous 12 months for Henry Hub natural gas of $4.12 per MMBtu and $92.71 per barrel for West Texas Intermediate oil, adjusted for market differentials, the Company's net book value of its United States natural gas and oil properties did not exceed the ceiling amount and did not result in a ceiling test impairment at December 31, 2011. Cash flow hedges of natural gas production in place increased this ceiling amount by approximately $262.5 million at December 31, 2011. At December 31, 2010, this ceiling amount of the Company's reserves was calculated based upon average quoted market prices of $4.38 per MMBtu for Henry Hub natural gas and $75.96 per barrel for West Texas Intermediate oil, and at December 31, 2009, the ceiling value of the Company's reserves was calculated based upon year-end quoted market prices of $3.87 per MMBtu for Henry Hub natural gas and $57.65 per barrel for West Texas Intermediate oil. 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. At March 31, 2009, the net capitalized costs of our natural gas and oil properties exceeded the ceiling by approximately $558.3 million (net of tax) and resulted in a non-cash ceiling test impairment in the first quarter of 2009.

All of our costs directly associated with the acquisition and evaluation of properties in New Brunswick, Canada relating to our exploration program at December 31, 2011 were unproved and did not exceed the ceiling amount. If our exploration program in Canada is unsuccessful on all or a portion of these properties, a ceiling test impairment may result in the future.

On December 31, 2009, the Company implemented certain provisions of FASB ASC 932, "Extractive Activities-Oil and Gas," as updated by Accounting Standards Update No. 2010-03, "Extractive Activities-Oil and Gas (Topic 932)" ("FASB ASC 932"), which (a) expand the definition of oil- and gas-producing activities; (b) require energy companies to value their proved reserves by averaging the price from the first day of each month from the previous 12 months instead of using a year-end price; and (c) allow for additional drilling locations to be classified as proved undeveloped reserves assuming such locations are supported by reliable technologies. The Company accounted for the FASB ASC 932 changes as a change in accounting principle that is inseparable from a change in accounting estimate and will account for the change prospectively. The Company is not able to disclose the effects resulting from the implementation of these changes on the amount of proved reserves and disclosed quantities because personnel and time constraints made it infeasible for the Company to perform a second internal reserve estimation process under the prior standards on its approximately 4,850 properties.

Gathering Systems. The Company's investment in gathering systems is primarily related to its Fayetteville Shale play in Arkansas and Marcellus Shale play in Pennsylvania. These assets are being depreciated on a straight-line basis over 25 years.

Capitalized Interest. Interest is capitalized on the cost of unevaluated gas and oil properties that are excluded from amortization and actively being evaluated.

Asset Retirement Obligations. An asset retirement obligation associated with the retirement of a tangible long-lived asset is recognized as a liability in the period incurred or when it becomes determinable, with an associated increase in the carrying amount of the related long-lived asset. The cost of the tangible asset, including the asset retirement cost, is depreciated over the useful life of the asset. The asset retirement obligation is recorded at its estimated fair value and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The Company owns natural gas and oil properties which require expenditures to plug and abandon the wells when reserves in the wells are depleted.

 

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to the differences between the financial carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the tax rate in effect for the year in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change. Deferred income taxes are provided to recognize the income tax effect of reporting certain transactions in different years for income tax and financial reporting purposes. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

The Company accounts for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return. The tax benefit from an uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination by taxing authorities based on technical merits of the position. The amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The effective tax rate and the tax basis of assets and liabilities reflect management's estimates of the ultimate outcome of various tax uncertainties.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage defined commodity price risks and does not use them for speculative trading purposes. The Company uses commodity swaps and options contracts to hedge sales of natural gas. Gains and losses resulting from the settlement of hedge contracts have been recognized in gas sales in the consolidated statements of operations when the contracts expire and the related physical transactions of the commodity hedged are recognized. Changes in the fair value of derivative instruments designated as cash flow hedges are reported in other comprehensive income (loss) to the extent that they are effective in offsetting the changes in the cash flows of the hedged item. In contrast, gains and losses from the ineffective portion of swaps and option contacts as well as basis swap contracts that do not qualify for hedge accounting treatment are recognized currently in gas sales in the consolidated statements of operations. Changes in the fair value of derivative instruments designated as fair value hedges as well as the offsetting gain or loss on the hedged item are recognized in earnings immediately. See Note 5 for a discussion of the Company's hedging activities.

Earnings Per Share

Earnings Per Share

Basic earnings per common share attributable to Southwestern Energy stockholders is computed by dividing net income (loss) attributable to Southwestern Energy by the weighted average number of common shares outstanding during each year. The diluted earnings per share attributable to Southwestern Energy stockholders 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 and the vesting of unvested restricted shares of common stock.

For the year ended December 31, 2011, outstanding options for 3,577,104 shares with an average exercise price of $11.78 were included in the calculation of diluted shares. Options for 881,254 shares were excluded from the calculation because they would have had an antidilutive effect. For the year ended December 31, 2010, outstanding options for 4,753,530 shares with an average exercise price of $9.42 were included in the calculation of diluted shares. Options for 548,160 shares were excluded from the calculation because they would have had an antidilutive effect. For the year ended December 31, 2009, 6,683,085 of the Company's outstanding options with an average exercise price of $8.33 were excluded from the calculation of diluted shares because they would have had an antidilutive effect.

For the year ended December 31, 2011,  241,044 shares of restricted stock were included from the calculation of diluted shares. The calculation excluded 135,352 shares of restricted stock because they would have had an antidilutive effect. For the year ended December 31, 2010, 700,512 shares of restricted stock were included from the calculation of diluted shares. The calculation excluded 39,600 shares of restricted stock because they would have had an antidilutive effect. For the year ended December 31, 2009, the number of shares of restricted stock excluded from the calculation of diluted shares was 836,861 because they would have had an antidilutive effect.

Supplemental Disclosures of Cash Flow Information

Supplemental disclosures of cash flow information (in thousands): 

	For the years ended December 31,
	2011	2010	2009
	(in thousands)
Cash paid during the year for interest, net of amounts capitalized	$              19,159	$              24,049	$              16,453
Cash paid (received) during the year for income taxes	4,198	14,368	(41,469)
Increase in noncash property additions	30,389	46,588	28,951

Stock-Based Compensation

The Company accounts for stock-based compensation transactions using a fair value method and recognizes an amount equal to the fair value of the stock options and stock-based payment cost in either the consolidated statement of operations or capitalizes the cost into natural gas and oil properties or gathering systems included in property and equipment. Costs are capitalized when they are directly related to the acquisition, exploration and development activities of the Company's natural gas and oil properties or directly related to the construction of the Company's gathering systems.

Treasury Stock

The Company maintains a non-qualified deferred compensation supplemental retirement savings plan for certain key employees whereby participants may elect to defer and contribute a portion of their compensation to a Rabbi Trust, as permitted by the plan. The Company includes the assets and liability of its supplemental retirement savings plan in its consolidated balance sheet. Shares of the Company's common stock purchased under the non-qualified deferred compensation arrangement are held in the Rabbi Trust and are presented as treasury stock and carried at cost. As of December 31, 2011, 98,889 shares were accounted for as treasury stock, compared to 156,636 shares at December 31, 2010.

Foreign Currency Translation

We have designated the Canadian dollar as the functional currency for our operations in Canada.

Accounting Standards Implemented in this Report

In January, 2011, we implemented certain provisions of Accounting Standards Update No. 2010-06, "Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements" ("Update 2010-06").  Update 2010-06 requires entities to provide a reconciliation of purchases, sales, issuance and settlements of anything valued with a Level 3 method, which is used to price the hardest to value instruments. The implementation did not have an impact on our results of operations, financial position or cash flows. 

In July, 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income ("Update 2011-05"), which amends Topic 200, Comprehensive Income. Update 2011-05 eliminates the option to present components of 'other comprehensive income' ("OCI") in the statement of changes in stockholders' equity, and requires presentation of total comprehensive income and components of net income in a single statement of comprehensive income, or in two separate, consecutive statements. Update 2011-05 requires presentation of reclassification adjustments for items transferred from OCI to net income on the face of the financial statements where the components of net income and the components of OCI are presented. The amendments do not change current treatment of items in OCI, transfer of items from OCI, or reporting items in OCI net of the related tax impact. Update 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011. The implementation of these changes did not have an impact on the Company's results of operations, financial position or cash flows.

Accounting Standards Not Yet Implemented

In May 2011, the FASB issued guidance on fair value measurement and disclosure requirements outlined in Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820)–Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS ("Update 2011-04"). Update 2011-04 expands existing fair value disclosure requirements, particularly for Level 3 inputs, including: quantitative disclosure of the unobservable inputs and assumptions used in the measurement; description of the valuation processes in place and sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs; the level of items (in the fair value hierarchy) that are not measured at fair value in the balance sheet but whose fair value must be disclosed; and the use of a nonfinancial asset if it differs from the highest and best use assumed in the fair value measurement. The amendments in Update 2011-04 must be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011. The implementation of the disclosure requirement is not expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued guidance on offsetting assets and liabilities and disclosure requirements in Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities ("Update 2011-11"). Update 2011-11 requires that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transaction s subject to an agreement similar to a master netting agreement. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. Update 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The implementation of the disclosure requirement is not expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued guidance on accumulated other comprehensive income in Accounting Standards Update No. 2011-12,Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 ("Update 2011-12").  Update 2011-12 defers the specific requirement to present items that are classified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income, as promulgated under Update 2011-05.  Update 2011-12 is effective for annual reporting periods beginning on or after December 15, 2011, and interim periods within those annual periods.  The Company is currently evaluating the impact that the implementation of the disclosure requirement is expected to have on the Company's consolidated results of operations, financial position or cash flows. 

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Retirement and Employee Benefit Plans (Weighted Average Assumptions Used in the Measurement of Net Periodic Benefit Cost) (Details)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Pension Benefits [Member]
Discount rate	5.50%	5.75%	6.00%
Expected return on plan assets	7.50%	7.50%	7.50%
Rate of compensation increase	4.50%	4.50%	4.50%
Other Postretirement Benefits [Member]
Discount rate	5.50%	5.75%	6.00%
Expected return on plan assets	0.00%	0.00%	0.00%
Rate of compensation increase	0.00%	0.00%	0.00%

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ 637,769		$ 603,833		$ (35,792)
Change in derivatives:
Reclassification to earnings	(194,693)	[1]	(182,619)	[1]	(376,259)	[1]
Ineffectiveness	2,518	[2]	4,145	[2]	(6,031)	[2]
Change in fair value of derivative instruments	520,552	[3]	179,649	[3]	218,699	[3]
Total change in derivatives	328,377		1,175		(163,591)
Change in value of pension and other postretirement liabilities:
Current period net loss	(4,129)	[4]	(2,148)	[4]	(477)	[4]
Current period prior service cost	0	[5]	16	[5]	(57)	[5]
Less: amortization of prior service cost included in net periodic pension cost	766	[6]	674	[6]	736	[6]
Total change in value of pension and other postretirement liabilities	(3,363)	[4]	(1,458)	[4]	202	[4]
Change in currency translation adjustment	(561)		(18)		0
Total comprehensive income (loss)	962,222		603,532		(199,181)
Less: comprehensive loss attributable to the noncontrolling interest	0		(285)		(142)
Comprehensive income (loss) attributable to Southwestern Energy	$ 962,222		$ 603,817		$ (199,039)

[1] (1) Net of ($126.6), ($118.9) and ($234.1) million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

[2] (2) Net of $1.6, $2.6, and ($3.8) million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

[3] (3) Net of $338.4, $119.5 and $137.7 million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

[4] (4) Net of ($2.7), ($2.0), and ($0.2) million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

[5] (5) Net of less than $0.1 and ($0.1) million in taxes for the years ended December 31, 2010 and 2009, respectively.

[6] (6) Net of $0.5, $0.6, and $0.5 million in taxes for the years ended December 31, 2011, 2010 and 2009, respectively.

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current Assets:
Cash and cash equivalents	$ 15,627	$ 16,055
Accounts receivable	341,915	351,573
Inventories	46,234	35,098
Hedging asset	514,465	130,412
Other	60,037	47,755
Total current assets	978,278	580,893
Property and Equipment:
Natural gas and oil properties, using the full cost method, including $942.9 million in 2011 and $712.1 million in 2010 excluded from amortization	9,544,708	7,749,863
Gathering systems	980,647	817,465
Other	535,464	413,557
Total property and equipment	11,060,819	8,980,885
Less: Accumulated depreciation, depletion and amortization	4,415,339	3,682,688
Property and equipment, net	6,645,480	5,298,197
Other Assets	279,139	138,373
TOTAL ASSETS	7,902,897	6,017,463
Current Liabilities:
Current portion of long-term debt	1,200	1,200
Accounts payable	514,071	473,890
Taxes payable	40,691	50,051
Interest payable	20,565	19,954
Advances from partners	84,082	81,705
Hedging liability	12,458	7,685
Current deferred income taxes	194,163	44,089
Other	17,683	15,409
Total current liabilities	884,913	693,983
Long-Term Debt	1,342,100	1,093,000
Other Liabilities:
Deferred income taxes	1,586,798	1,130,292
Long-term hedging liability	55	40,188
Pension and other postretirement liabilities	20,338	15,777
Other long-term liabilities	99,389	79,347
Total Other Liabilities	1,706,580	1,265,604
Commitments and Contingencies
Equity:
Common stock, $0.01 par value; authorized 1,250,000,000 shares in 2011 and 1,250,000,000 in 2010; issued 349,058,501 shares in 2011 and 347,733,839 in 2010	3,491	3,477
Additional paid-in capital	903,399	862,423
Retained earnings	2,656,214	2,018,445
Accumulated other comprehensive income	408,428	83,975
Common stock in treasury, 98,889 shares in 2011 and 156,636 in 2010	(2,228)	(3,444)
Total Equity	3,969,304	2,964,876
TOTAL LIABILITIES AND EQUITY	$ 7,902,897	$ 6,017,463

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Tax

(9)   INCOME TAXES

The provision (benefit) for income taxes included the following components:

	2011	2010	2009
	(in thousands)
Current:
Federal	$       3,378	$       10,421	$      (65,309)
State	820	1,518	340
	4,198	11,939	(64,969)
Deferred:
Federal	345,922	319,279	48,308
State	60,941	59,982	298
Foreign	2,160	459	0
	409,023	379,720	48,606
Provision (benefit) for income taxes	$     413,221	$     391,659	$      (16,363)

The provision for income taxes was an effective rate of 39.3% in 2011, 39.3% in 2010 and 31.5% in 2009. The following reconciles the provision for income taxes included in the consolidated statements of operations with the provision which would result from application of the statutory federal tax rate to pre-tax financial income: 

	2011	2010	2009
	(in thousands)
Expected provision (benefit) at federal statutory rate	$     367,854	$     348,632	$      (18,205)
Increase (decrease) resulting from:
State income taxes, net of federal income tax effect	40,145	39,975	415
Nondeductible expenses	1,244	660	1,497
Other	3,978	2,392	(70)
Provision (benefit) for income taxes	$     413,221	$     391,659	$      (16,363)

The components of the Company's net deferred tax liability as of December 31, 2011 and 2010 were as follows:

	2011	2010
	(in thousands)
Deferred tax liabilities:
Differences between book and tax basis of property	$    1,916,619	$    1,411,240
Cash flow hedges	276,063	61,394
Other	15,755	14,122
	2,208,437	1,486,756
Deferred tax assets:
Accrued compensation	30,316	16,279
Alternative minimum tax credit carryforward	73,516	70,138
Stored natural gas	9,053	7,145
Accrued pension costs	3,982	6,227
Asset retirement obligations	13,188	10,848
Net operating loss carryforward	287,830	192,086
Other	9,591	9,652
	427,476	312,375
Net deferred tax liability	$    1,780,961	$    1,174,381

The net deferred tax liability at December 31, 2011 was comprised of net long-term deferred income tax liabilities of $1,586.8 million in addition to a net current deferred income tax liability of $194.2 million.  The net deferred tax liability at December 31, 2010 was comprised of net long-term deferred income tax liabilities of $1,130.3 million in addition to a net current deferred income tax liability of $44.1 million. In 2011, the Company paid $0.8 million in state income taxes and paid $3.4 million in alternative minimum taxes. In 2010, the Company paid $0.4 million in state income taxes and paid $14.0 million in alternative minimum taxes. The Company's net operating loss carryforward at December 31, 2011 was $878.2 million and has expiration dates of 2027 through 2031. The Company also had an alternative minimum tax credit carryforward of $73.5 million and a statutory depletion carryforward of $13.0 million at December 31, 2011.

Deferred tax assets relating to tax benefits of employee stock option grants have been reduced to reflect exercises in 2011. Some exercises resulted in tax deductions in excess of previously recorded benefits based on the option value at the time of the grant ("windfalls"). Although these additional tax benefits or "windfalls" are reflected in net operating loss carryforwards, pursuant to GAAP, the additional tax benefit associated with the windfall is not recognized until the deduction reduces taxes payable. Accordingly, since the tax benefit does not reduce our current taxes payable in 2011 due to net operating loss carryforwards, these "windfall" tax benefits are not reflected in our net operating losses in deferred tax assets for 2011. Windfalls included in net operating loss carryforwards but not reflected in deferred tax assets for 2011 were $110.3 million. The Company utilized a portion of its net operating loss carryforward in 2010 based on its federal income tax return filing. Therefore, an additional tax return benefit associated with the windfall was recognized in 2011.

As of December 31, 2011, the Company has no unrecognized tax benefits. The income tax years 2008 and 2009 have been audited by the Internal Revenue Service resulting in no changes to the Company's taxes. The income tax years 2009 to 2011 remain open to examination by the major taxing jurisdictions to which the Company is subject, except for the 2009 federal tax return for which the examination is complete.

The Company has an income tax net operating loss carryforward related to its Canadian operations of $11.0 million, and has expiration dates of 2030 through 2031. The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax asset associated with the Canadian net operating loss. Based on this assessment, the Company recorded a valuation allowance of $2.0 million, as of December 31, 2011, to reflect that it is more likely than not that the deferred tax asset will not be recognized. The Company recorded a valuation allowance of $0.5 million in 2010. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are increased.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011	Feb. 23, 2012
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Entity Registrant Name	SOUTHWESTERN ENERGY CO
Entity Central Index Key	0000007332
Current Fiscal Year End Date	--12-31
Entity Well Known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		$ 14,642,400,618
Entity Common Stock, Shares Outstanding		349,044,745

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Asset Retirement Obligations

12 Months Ended

Dec. 31, 2011

Asset Retirement Obligation

Asset Retirement Obligations

(10) ASSET RETIREMENT OBLIGATIONS

The following table summarizes the Company's 2011 and 2010 activity related to asset retirement obligations:

	2011	2010
	(in thousands)
Asset retirement obligation at January 1	$        27,786	$        22,972
Accretion of discount	1,361	1,095
Obligations incurred	4,304	6,926
Obligations settled/removed	(883)	(477)
Revisions of estimates	5,125	(2,730)
Asset retirement obligation at December 31	$        37,693	$        27,786
Current liability	1,539	1,829
Long-term liability	36,154	25,957
Asset retirement obligation at December 31	$        37,693	$        27,786

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Condensed Consolidating Financial Information (Condensed Consolidating Balance Sheets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Cash and cash equivalents	$ 15,627	$ 16,055	$ 13,184	$ 196,277
Accounts receivable	341,915	351,573
Inventories	46,234	35,098
Other current assets	574,502	178,167
Total current assets	978,278	580,893
Intercompany receivables	0	0
Investments		0
Property and equipment	11,060,819	8,980,885
Less: Accumulated depreciation, depletion and amortization	4,415,339	3,682,688
Property and equipment, net	6,645,480	5,298,197
Investments in subsidiaries (equity method)	0	0
Other assets	279,139	138,373
TOTAL ASSETS	7,902,897	6,017,463	4,770,250
Accounts and notes payable	576,527	545,095
Other current liabilities	308,386	148,888
Total current liabilities	884,913	693,983
Intercompany payables	0	0
Long-term debt	1,342,100	1,093,000
Deferred income taxes	1,586,798	1,130,292
Other liabilities	119,782	135,312
Total liabilities	3,933,593	3,052,587
Commitments and Contingencies
Total Equity	3,969,304	2,964,876	2,340,981	2,517,963
TOTAL LIABILITIES AND EQUITY	7,902,897	6,017,463
Parent [Member]
Cash and cash equivalents	14,711	8,381	7,378	195,969
Accounts receivable	2,914	382
Inventories	0	0
Other current assets	6,087	5,015
Total current assets	23,712	13,778
Intercompany receivables	2,053,132	1,820,857
Investments		0
Property and equipment	180,300	124,823
Less: Accumulated depreciation, depletion and amortization	57,254	52,256
Property and equipment, net	123,046	72,567
Investments in subsidiaries (equity method)	3,256,195	2,253,871
Other assets	28,641	18,918
TOTAL ASSETS	5,484,726	4,179,991
Accounts and notes payable	206,541	175,476
Other current liabilities	4,712	3,288
Total current liabilities	211,253	178,764
Intercompany payables	0	0
Long-term debt	1,342,100	1,093,000
Deferred income taxes	(97,045)	(98,206)
Other liabilities	59,114	41,557
Total liabilities	1,515,422	1,215,115
Total Equity	3,969,304	2,964,876
TOTAL LIABILITIES AND EQUITY	5,484,726	4,179,991
Guarantors [Member]
Cash and cash equivalents	0	7,631	5,776	0
Accounts receivable	309,038	331,154
Inventories	45,260	34,263
Other current assets	563,635	171,060
Total current assets	917,933	544,108
Intercompany receivables	53	131
Investments		11,103
Property and equipment	9,731,944	7,871,279
Less: Accumulated depreciation, depletion and amortization	4,220,205	3,526,010
Property and equipment, net	5,511,739	4,345,269
Investments in subsidiaries (equity method)	0	0
Other assets	227,152	92,747
TOTAL ASSETS	6,656,877	4,993,358
Accounts and notes payable	332,710	336,411
Other current liabilities	301,170	142,839
Total current liabilities	633,880	479,250
Intercompany payables	1,628,750	1,317,696
Long-term debt	0	0
Deferred income taxes	1,442,576	1,066,166
Other liabilities	54,826	89,986
Total liabilities	3,760,032	2,953,098
Total Equity	2,896,845	2,040,260
TOTAL LIABILITIES AND EQUITY	6,656,877	4,993,358
Non-Guarantors [Member]
Cash and cash equivalents	916	43	30	308
Accounts receivable	29,963	20,037
Inventories	974	835
Other current assets	4,780	2,092
Total current assets	36,633	23,007
Intercompany receivables	23,517	18,724
Investments		(11,102)
Property and equipment	1,148,575	984,783
Less: Accumulated depreciation, depletion and amortization	137,880	104,422
Property and equipment, net	1,010,695	880,361
Investments in subsidiaries (equity method)	0	0
Other assets	23,346	26,708
TOTAL ASSETS	1,094,191	937,698
Accounts and notes payable	37,276	33,208
Other current liabilities	2,504	2,761
Total current liabilities	39,780	35,969
Intercompany payables	447,952	522,017
Long-term debt	0	0
Deferred income taxes	241,267	162,332
Other liabilities	5,842	3,769
Total liabilities	734,841	724,087
Total Equity	359,350	213,611
TOTAL LIABILITIES AND EQUITY	1,094,191	937,698
Eliminations [Member]
Cash and cash equivalents	0	0	0	0
Accounts receivable	0	0
Inventories	0	0
Other current assets	0	0
Total current assets	0	0
Intercompany receivables	(2,076,702)	(1,839,712)
Investments		(1)
Property and equipment	0	0
Less: Accumulated depreciation, depletion and amortization	0	0
Property and equipment, net	0	0
Investments in subsidiaries (equity method)	(3,256,195)	(2,253,871)
Other assets	0	0
TOTAL ASSETS	(5,332,897)	(4,093,584)
Accounts and notes payable	0	0
Other current liabilities	0	0
Total current liabilities	0	0
Intercompany payables	(2,076,702)	(1,839,713)
Long-term debt	0	0
Deferred income taxes	0	0
Other liabilities	0	0
Total liabilities	(2,076,702)	(1,839,713)
Total Equity	(3,256,195)	(2,253,871)
TOTAL LIABILITIES AND EQUITY	$ (5,332,897)	$ (4,093,584)

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
CONDENSED CONSOLIDATED BALANCE SHEETS
Natuarl gas and oil properties, using the full cost method, costs excluded from amortization	$ 942.9	$ 712.1
Common Stock, Issued, Shares	349,058,501	347,733,839
Common Stock, Authorized, Shares	1,250,000,000	1,250,000,000
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock in Treasury, Shares	98,889	156,636

XML

Natural Gas and Oil Producing Activites

12 Months Ended

Dec. 31, 2011

Natural Gas And Oil Properties Abstract

Natural Gas and Oil Properties

(4) NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)

The Company's natural gas and oil properties are located in the United States and Canada.

Net Capitalized Costs

The following table shows the capitalized costs of natural gas and oil properties and the related accumulated depreciation, depletion and amortization at December 31, 2011 and 2010:

	2011		2010
	(in thousands)
Proved properties	$    8,601,818		$    7,037,746
Unproved properties	942,890	(1)	712,117	(1)
Total capitalized costs	9,544,708		7,749,863
Less:  Accumulated depreciation, depletion and amortization	4,092,410		3,444,477
Net capitalized costs	$    5,452,298		$    4,305,386

(1) Includes $27.9 and $10.7 million related to our exploration program in New Brunswick, Canada at December 31, 2011 and 2010, respectively.

The table below sets forth the composition of net unevaluated costs excluded from amortization as of December 31, 2011.

	2011	2010	2009	Prior	Total
	(in thousands)
Property acquisition costs	$     254,622	$     143,165	$       44,513	$       110,767	$    553,067
Exploration and development costs	190,240	20,844	29,527	67,335	307,946
Capitalized interest	14,651	12,901	10,261	44,064	81,877
	$     459,513	$     176,910	$     84,301	$    222,166	$    942,890

(1) Property acquisition costs include $7.5 million, exploration costs include $19.2 million and capitalized interest includes $1.2 million related to our exploration program in New Brunswick, Canada.

Of the total net unevaluated costs excluded from amortization at December 31, 2011, approximately $83.2 million is related to unevaluated seismic costs in the Fayetteville Shale play, approximately $101.3 million is related to acquisition of undeveloped properties in the Company's Fayetteville Shale play, approximately $179.4 million is related to acquisition of undeveloped properties in the Company's Marcellus Shale play and approximately $245.0 million is related to acquisition of undeveloped properties in the Company's New Ventures, excluding our exploration program in New Brunswick, Canada. The Company has $27.9 million of unevaluated costs related to its exploration program in Canada. Additionally, the Company has approximately $180.2 million of unevaluated costs related to costs of wells in progress. The remaining costs excluded from amortization are related to properties which are not individually significant and on which the evaluation process has not been completed. The timing and amount of property acquisition and seismic costs included in the amortization computation will depend on the location and timing of drilling wells results of drilling and other assessments. The Company is, therefore, unable to estimate when these costs will be included in the amortization computation.

Costs Incurred in Natural Gas and Oil Exploration and Development

The table below sets forth capitalized costs incurred in natural gas and oil property acquisition, exploration and development activities:

	2011		2010		2009
	(in thousands, except per Mcfe amounts)
Proved property acquisition costs	$            17		$                0		$          4,372
Unproved property acquisition costs	262,886	(1)	229,909	(1)	115,217
Exploration costs	63,419	(2)	27,062	(2)	52,178
Development costs	1,633,784		1,524,453		1,358,109
Capitalized costs incurred	1,960,106		1,781,424		1,529,876
Full cost pool amortization per Mcfe	$            1.30		$            1.34		$            1.51

(1) Includes $0.2 million and $2.5 million, in 2011 and 2010, respectively, related to our exploration program in New Brunswick, Canada.

(2) Includes $18.4 million and $8.2 million in 2011 and 2010, respectively, related to our exploration program in New Brunswick, Canada.

Capitalized interest is included as part of the cost of natural gas and oil properties. The Company capitalized $43.4 million, $32.9 million and $40.2 million during 2011, 2010 and 2009, respectively, based on the Company's weighted average cost of borrowings used to finance the expenditures.

In addition to capitalized interest, the Company also capitalized internal costs of $147.7 million, $139.2 million and $112.9 million during 2011, 2010 and 2009, respectively. These internal costs were directly related to acquisition, exploration and development activities and are included as part of the cost of natural gas and oil properties.

Results of Operations from Natural Gas and Oil Producing Activities

The table below sets forth the results of operations from natural gas and oil producing activities:

	2011	2010	2009
	(in thousands)
Sales	$ 2,100,488	$ 1,890,444	$ 1,593,231
Production (lifting) costs	(469,153)	(376,939)	(259,588)
Depreciation, depletion and amortization	(666,107)	(561,003)	(474,014)
Impairment of natural gas and oil properties	0	0	(907,812)
	965,228	952,502	(48,183)
Provision (benefit) for income taxes	376,049	371,281	(15,650)
Results of operations	$   589,179	$    581,221	$    (32,533)

The results of operations shown above exclude general and administrative expenses, and interest expense and are not necessarily indicative of the contribution made by our natural gas and oil operations to the Company's consolidated operating results. Income tax expense is calculated by applying the statutory tax rates to the revenues less costs, including depreciation, depletion and amortization, and after giving effect to permanent differences and tax credits.

Natural Gas and Oil Reserve Quantities

The Company engaged the services of Netherland, Sewell & Associates, Inc. ("NSAI"), an independent petroleum engineering firm, to audit the reserves estimated by the Company's reservoir engineers. In conducting its audit, the engineers and geologists of NSAI studied the Company's major properties in detail and independently developed reserve estimates. NSAI's audit consists primarily of substantive testing, which includes a detailed review of the Company's major properties and accounted for approximately 90%, 85% and 88% of the present worth of the Company's total proved reserves at December 31, 2011, 2010 and 2009, respectively. A reserve audit is not the same as a financial audit and a reserve audit is less rigorous in nature than a reserve report prepared by an independent petroleum engineering firm containing its own estimate of reserves. Reserve estimates are inherently imprecise and the Company's reserve estimates are generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, the Company's estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.

The following table summarizes the changes in the Company's proved natural gas and oil reserves for 2011, 2010 and 2009 all of which were located in the United States:

	2011		2010		2009
	Natural		Natural		Natural
	Gas	Oil	Gas	Oil	Gas	Oil
	(MMcf)	(MBbls)	(MMcf)	(MBbls)	(MMcf)	(MBbls)
Proved reserves, beginning of year	4,929,980	1,219	3,650,303	1,059	2,175,528	1,507
Revisions of previous estimates	34,505	(125)	309,292	50	94,930	(346)
Extensions, discoveries and other additions	1,459,428	2	1,429,439	281	1,683,264	22
Production	(499,433)	(97)	(403,636)	(171)	(299,698)	(124)
Acquisition of reserves in place	13	0	0	0	1,795	0
Disposition of reserves in place	(37,286)	(3)	(55,418)	0	(5,516)	0
Proved reserves, end of year	5,887,207	996	4,929,980	1,219	3,650,303	1,059
Proved developed reserves:
Beginning of year	2,687,238	1,173	1,972,767	1,028	1,336,370	1,352
End of year	3,254,018	983	2,687,238	1,173	1,972,767	1,028
Proved undeveloped reserves:
Beginning of year	2,242,742	46	1,677,536	31	839,158	155
End of year	2,633,189	13	2,242,742	46	1,677,536	31

The Company has no reserves from synthetic gas, synthetic oil or nonrenewable natural resources intended to be upgraded into synthetic gas or oil.

Standardized Measure of Discounted Future Net Cash Flows

The following standardized measures of discounted future net cash flows relating to proved natural gas and oil reserves at December 31, 2011, 2010 and 2009 are calculated after income taxes and discounted using a 10% annual discount rate and do not purport to present the fair market value the Company's proved gas and oil reserves:

	2011	2010	2009
	(in thousands)
Future cash inflows	$ 22,012,205	$ 19,620,254	$ 12,533,868
Future production costs	(8,080,207)	(6,826,915)	(4,488,884)
Future development costs	(3,425,185)	(3,025,433)	(2,367,206)
Future income tax expense	(3,366,175)	(3,143,571)	(1,569,242)
Future net cash flows	7,140,638	6,624,335	4,108,536
10% annual discount for estimated timing of cash flows	(3,689,838)	(3,610,585)	(2,306,718)
Standardized measure of discounted future net cash flows	$ 3,450,800	$  3,013,750	$  1,801,818

Under the standardized measure, future cash inflows were estimated by applying an average price from the first day of each month from the previous 12 months, adjusted for known contractual changes, to the estimated future production of year-end proved reserves in 2011 and 2010, and utilized year-end pricing in 2009. Prices used for the standardized measure above were average market prices of $4.12 per MMBtu for natural gas and $92.71 per barrel for oil in 2011, average market prices of $4.38 per MMBtu for natural gas and $75.96 per barrel for oil in 2010, and year-end prices of $3.87 per MMBtu for natural gas and $57.65 per barrel for oil in 2009. Future cash inflows were reduced by estimated future production and development costs based on year-end costs to determine pre-tax cash inflows. Future income taxes were computed by applying the year-end statutory rate to the excess of pre-tax cash inflows over the Company's tax basis in the associated proved gas and oil properties after giving effect to permanent differences and tax credits.

Following is an analysis of changes in the standardized measure during 2011, 2010 and 2009:

	2011	2010	2009
	(in thousands)
Standardized measure, beginning of year	$  3,013,750	$  1,801,818	$  2,109,262
Sales and transfers of natural gas and oil produced, net of production costs	(1,632,156)	(1,516,571)	(1,330,256)
Net changes in prices and production costs	(381,131)	706,062	(1,321,404)
Extensions, discoveries, and other additions, net of future production and development costs	1,163,992	1,205,464	976,449
Acquisition of reserves in place	30	0	1,878
Sales of reserves in place	(11,761)	(6,269)	(4,430)
Revisions of previous quantity estimates	34,221	324,284	88,261
Accretion of discount	426,245	230,355	302,439
Net change in income taxes	(103,643)	(746,971)	413,399
Changes in estimated future development costs	70,492	(10,558)	204,005
Previously estimated development costs incurred during the year	564,894	353,560	218,625
Changes in production rates (timing) and other	305,867	672,576	143,590
Standardized measure, end of year	$  3,450,800	$  3,013,750	$  1,801,818

XML

Prepaid Expenses

12 Months Ended

Dec. 31, 2011

Prepaid Expenses [Abstract]

Prepaid Expenses

(3)   PREPAID EXPENSES

The components of prepaid expenses included in other current assets as of December 31, 2011 and 2010 consisted of the following:

	2011	2010
	(in thousands)
Prepaid drilling costs	$            42,775	$              21,997
Prepaid insurance	7,275	7,690
Total	$            50,050	$               29,687

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Condensed Consolidating Financial Information

12 Months Ended

Dec. 31, 2011

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

(15) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company is providing condensed consolidating financial information for SEECO, SEPCO and SES, its subsidiaries that are currently guarantors of the Company's registered public debt, and for its other subsidiaries that are not guarantors of such debt. These wholly owned subsidiary guarantors have jointly and severally, fully and unconditionally guaranteed the Company's 7.35% Senior Notes and 7.125% Senior Notes. The subsidiary guarantees (i) rank equally in right of payment with all of the existing and future senior debt of the subsidiary guarantors; (ii) rank senior to all of the existing and future subordinated debt of the subsidiary guarantors; (iii) are effectively subordinated to any future secured obligations of the subsidiary guarantors to the extent of the value of the assets securing such obligations; and (iv) are structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors. In the case of each series of notes, if no default or event of default has occurred and is continuing, these guarantees will be released (i) automatically upon any sale, exchange or transfer of all of the Company's equity interests in the guarantor; (ii) automatically upon the liquidation and dissolution of a guarantor; (iii) following delivery of notice to the trustee of the release of the guarantor of its obligations under the Company's credit facility; and (iv) upon legal or covenant defeasance or other satisfaction of the obligations under the notes.

The Company has not presented separate financial and narrative information for each of the subsidiary guarantors because it believes that such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the guarantees. The following condensed consolidating financial information summarizes the results of operations, financial position and cash flows for the Company's guarantor and non-guarantor subsidiaries.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
	Parent	Guarantors	Non-Guarantors	Eliminations	Consolidated
	(in thousands)
Year ended December 31, 2011:
Operating revenues	$                      0	$       2,803,385	$           411,998	$         (262,477)	$        2,952,906
Operating costs and expenses:
Gas purchases	0	710,487	0	(1,396)	709,091
Operating expenses	0	380,154	118,713	(257,923)	240,944
General and administrative expenses	0	141,499	19,700	(3,158)	158,041
Depreciation, depletion and amortization	0	665,615	38,896	0	704,511
Taxes, other than income taxes	0	53,950	11,568	0	65,518
Total operating costs and expenses	0	1,951,705	188,877	(262,477)	1,878,105
Operating income	0	851,680	223,121	0	1,074,801
Other income, net	0	306	(42)	0	264
Equity in earnings of subsidiaries	637,769	0	0	(637,769)	0
Interest expense	0	11,277	12,798	0	24,075
Income (loss) before income taxes	637,769	840,709	210,281	(637,769)	1,050,990
Provision for income taxes	0	332,795	80,426	0	413,221
Net income (loss)	637,769	507,914	129,855	(637,769)	637,769
Year ended December 31, 2010:
Operating revenues	$                      0	$       2,488,105	$           318,232	$         (195,674)	$        2,610,663
Operating costs and expenses:
Gas purchases	0	612,745	0	(1,584)	611,161
Operating expenses	0	293,713	91,164	(193,106)	191,771
General and administrative expenses	0	127,022	19,525	(984)	145,563
Depreciation, depletion and amortization	0	559,845	30,487	0	590,332
Taxes, other than income taxes	0	44,200	6,408	0	50,608
Total operating costs and expenses	0	1,637,525	147,584	(195,674)	1,589,435
Operating income	0	850,580	170,648	0	1,021,228
Other income, net	0	242	185	0	427
Equity in earnings of subsidiaries	604,118	0	0	(604,118)	0
Interest expense	0	10,777	15,386	0	26,163
Income (loss) before income taxes	604,118	840,045	155,447	(604,118)	995,492
Provision for income taxes	0	330,879	60,780	0	391,659
Net income (loss)	604,118	509,166	94,667	(604,118)	603,833
Less: Net loss attributable to noncontrolling interest	0	(285)	0	0	(285)
Net income (loss) attributable to Southwestern Energy	$           604,118	$           509,451	$              94,667	$         (604,118)	$            604,118
Year ended December 31, 2009:
Operating revenues	$                      0	$       2,071,746	$           207,672	$         (133,639)	$        2,145,779
Operating costs and expenses:
Gas purchases	0	483,922	0	(1,086)	482,836
Operating expenses	0	201,964	66,682	(132,105)	136,541
General and administrative expenses	0	109,870	13,196	(448)	122,618
Depreciation, depletion and amortization	0	472,757	20,901	0	493,658
Impairment of natural gas & oil properties	0	907,812	0	0	907,812
Taxes, other than income taxes	0	33,935	3,345	0	37,280
Total operating costs and expenses	0	2,210,260	104,124	(133,639)	2,180,745
Operating income (loss)	0	(138,514)	103,548	0	(34,966)
Other income, net	0	1,388	61	0	1,449
Equity in earnings of subsidiaries	(35,650)	0	0	35,650	0
Interest expense	0	12,760	5,878	0	18,638
Income (loss) before income taxes	(35,650)	(149,886)	97,731	35,650	(52,155)
Provision (benefit) for income taxes	0	(53,549)	37,186	0	(16,363)
Net income (loss)	(35,650)	(96,337)	60,545	35,650	(35,792)
Less: Net loss attributable to noncontrolling interest	0	(142)	0	0	(142)
Net income (loss) attributable to Southwestern Energy	$            (35,650)	$            (96,195)	$              60,545	$             35,650	$             (35,650)

CONDENSED CONSOLIDATING BALANCE SHEETS
	Parent	Guarantors	Non- Guarantors	Eliminations	Consolidated
	(in thousands)
December 31, 2011:
ASSETS
Cash and cash equivalents	$         14,711	$                  0	$              916	$                0	$        15,627
Accounts receivable	2,914	309,038	29,963	0	341,915
Inventories	0	45,260	974	0	46,234
Other current assets	6,087	563,635	4,780	0	574,502
Total current assets	23,712	917,933	36,633	0	978,278
Intercompany receivables	2,053,132	53	23,517	(2,076,702)	0
Property and equipment	180,300	9,731,944	1,148,575	0	11,060,819
Less: Accumulated depreciation, depletion and amortization	57,254	4,220,205	137,880	0	4,415,339
	123,046	5,511,739	1,010,695	0	6,645,480
Investments in subsidiaries (equity method)	3,256,195	0	0	(3,256,195)	0
Other assets	28,641	227,152	23,346	0	279,139
Total assets	$    5,484,726	$    6,656,877	$    1,094,191	$  (5,332,897)	$   7,902,897
LIABILITIES AND EQUITY
Accounts and notes payable	$      206,541	$       332,710	$         37,276	$                0	$       576,527
Other current liabilities	4,712	301,170	2,504	0	308,386
Total current liabilities	211,253	633,880	39,780	0	884,913
Intercompany payables	0	1,628,750	447,952	(2,076,702)	0
Long-term debt	1,342,100	0	0	0	1,342,100
Deferred income taxes	(97,045)	1,442,576	241,267	0	1,586,798
Other liabilities	59,114	54,826	5,842	0	119,782
Total liabilities	1,515,422	3,760,032	734,841	(2,076,702)	3,933,593
Commitments and contingencies
Total equity	3,969,304	2,896,845	359,350	(3,256,195)	3,969,304
Total liabilities and equity	$    5,484,726	$    6,656,877	$     1,094,191	$  (5,332,897)	$    7,902,897
December 31, 2010:
ASSETS
Cash and cash equivalents	$           8,381	$           7,631	$                43	$                0	$         16,055
Accounts receivable	382	331,154	20,037	0	351,573
Inventories	0	34,263	835	0	35,098
Other current assets	5,015	171,060	2,092	0	178,167
Total current assets	13,778	544,108	23,007	0	580,893
Intercompany receivables	1,820,857	131	18,724	(1,839,712)	0
Investments	0	11,103	(11,102)	(1)	0
Property and equipment	124,823	7,871,279	984,783	0	8,980,885
Less: Accumulated depreciation, depletion and amortization	52,256	3,526,010	104,422	0	3,682,688
	72,567	4,345,269	880,361	0	5,298,197
Investments in subsidiaries (equity method)	2,253,871	0	0	(2,253,871)	0
Other assets	18,918	92,747	26,708	0	138,373
Total assets	$    4,179,991	$    4,993,358	$       937,698	$  (4,093,584)	$    6,017,463
LIABILITIES AND EQUITY
Accounts and notes payable	$       175,476	$       336,411	$         33,208	$                0	$       545,095
Other current liabilities	3,288	142,839	2,761	0	148,888
Total current liabilities	178,764	479,250	35,969	0	693,983
Intercompany payable	0	1,317,696	522,017	(1,839,713)	0
Long-term debt	1,093,000	0	0	0	1,093,000
Deferred income taxes	(98,206)	1,066,166	162,332	0	1,130,292
Other liabilities	41,557	89,986	3,769	0	135,312
Total liabilities	1,215,115	2,953,098	724,087	(1,839,713)	3,052,587
Commitments and contingencies
Total equity	2,964,876	2,040,260	213,611	(2,253,871)	2,964,876
Total liabilities and equity	$    4,179,991	$    4,993,358	$       937,698	$  (4,093,584)	$    6,017,463

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
	Parent	Guarantors	Non-Guarantors	Eliminations	Consolidated
	(in thousands)
Year ended December 31, 2011:
Net cash provided by operating activities	$      14,688	$ 1,482,853	$    242,276	$              0	$ 1,739,817
Investing activities:
Capital investments	(66,647)	(1,916,246)	(201,581)	0	(2,184,474)
Proceeds from sale of property and equipment	0	154,261	265	0	154,526
Transfers to restricted cash	(85,055)	0	0	0	(85,055)
Transfers from  restricted cash	85,055	0	0	0	85,055
Other	16,263	(43,961)	32,856	0	5,158
Net cash used in investing activities	(50,384)	(1,805,946)	(168,460)	0	(2,024,790)
Financing activities:
Intercompany activities	(242,277)	315,462	(73,185)	0	0
Payments on current portion of long-term debt	(1,200)	0	0	0	(1,200)
Payments on revolving long-term debt	(3,445,900)	0	0	0	(3,445,900)
Borrowings under revolving long-term debt	3,696,200	0	0	0	3,696,200
Other	35,203	0	0	0	35,203
Net cash provided by financing activities	42,026	315,462	(73,185)	0	284,303
Effect of exchange rate changes on cash	0	0	242	0	242
Increase (decrease) in cash and cash equivalents	6,330	(7,631)	873	0	(428)
Cash and cash equivalents at beginning of year	8,381	7,631	43	0	16,055
Cash and cash equivalents at end of year	$        14,711	$            0	$           916	$              0	$      15,627
Year ended December 31, 2010:
Net cash provided by operating activities	$      25,865	$ 1,368,248	$    248,472	$              0	$ 1,642,585
Investing activities:
Capital investments	(46,062)	(1,718,847)	(308,265)	0	(2,073,174)
Proceeds from sale of property and equipment	0	348,274	1,953	0	350,227
Transfers to restricted cash	(356,035)	0	0	0	(356,035)
Transfers from  restricted cash	356,035	0	0	0	356,035
Other	11,864	(22,719)	8,171	0	(2,684)
Net cash used in investing activities	(34,198)	(1,393,292)	(298,141)	0	(1,725,631)
Financing activities:
Intercompany activities	(76,904)	26,899	50,005	0	0
Payments on current portion of long-term debt	(1,200)	0	0	0	(1,200)
Payments on revolving long-term debt	(2,958,100)	0	0	0	(2,958,100)
Borrowings under revolving long-term debt	3,054,800	0	0	0	3,054,800
Other	(9,260)	0	0	0	(9,260)
Net cash provided by financing activities	9,336	26,899	50,005	0	86,240
Effect of exchange rate changes on cash	0	0	(323)	0	(323)
Increase in cash and cash equivalents	1,003	1,855	13	0	2,871
Cash and cash equivalents at beginning of year	7,378	5,776	30	0	13,184
Cash and cash equivalents at end of year	$        8,381	$         7,631	$             43	$              0	$      16,055
Year ended December 31, 2009:
Net cash provided by operating activities	$      58,212	$ 1,198,995	$    102,169	$              0	$ 1,359,376
Investing activities:
Capital investments	(17,075)	(1,517,990)	(245,100)	0	(1,780,165)
Proceeds from sale of property and equipment	0	763	55	0	818
Other	10,980	(29,238)	17,001	0	(1,257)
Net cash used in investing activities	(6,095)	(1,546,465)	(228,044)	0	(1,780,604)
Financing activities:
Intercompany activities	(478,843)	353,246	125,597	0	0
Payments on current portion of long-term debt	(61,200)	0	0	0	(61,200)
Payments on revolving long-term debt	(1,371,700)	0	0	0	(1,371,700)
Borrowings under revolving long-term debt	1,696,200	0	0	0	1,696,200
Other	(25,165)	0	0	0	(25,165)
Net cash provided by (used in) financing activities	(240,708)	353,246	125,597	0	238,135
Increase (decrease) in cash and cash equivalents	(188,591)	5,776	(278)	0	(183,093)
Cash and cash equivalents at beginning of year	195,969	0	308	0	196,277
Cash and cash equivalents at end of year	$        7,378	$         5,776	$             30	$              0	$      13,184

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Retirement and Employee Benefits Plans

12 Months Ended

Dec. 31, 2011

Retirement and Employee Benefit Plans [Abstract]

Retirement and Employee Benefits Plans

(11) RETIREMENT AND EMPLOYEE BENEFIT PLANS

401(k) Defined Contribution Plan

The Company has a 401(k) defined contribution plan covering eligible employees. The Company expensed $1.9 million, $0.9 million, and $0.8 million of contribution expense in 2011, 2010 and 2009, respectively. Additionally, the Company capitalized $3.8 million, $4.2 million, and $3.3 million of contributions in 2011, 2010 and 2009, respectively, directly related to the acquisition, exploration and development activities of the Company's natural gas and oil properties or directly related to the construction of the Company's gathering systems.

Defined Benefit Pension and Other Postretirement Plans

Prior to January 1, 1998, the Company maintained a traditional defined benefit plan with benefits payable based upon average final compensation and years of service.  Effective January 1, 1998, the Company amended its pension plan to become a "cash balance" plan on a prospective basis for its non-bargaining employees. A cash balance plan provides benefits based upon a fixed percentage of an employee's annual compensation. The Company's funding policy is to contribute amounts which are actuarially determined to provide the plans with sufficient assets to meet future benefit payment requirements and which are tax deductible.

The postretirement benefit plan provides contributory health care and life insurance benefits. Employees become eligible for these benefits if they meet age and service requirements. Generally, the benefits paid are a stated percentage of medical expenses reduced by deductibles and other coverages.

Substantially all employees are covered by the Company's defined benefit pension and postretirement benefit plans. The Company accounts for its defined benefit pension and other postretirement plans by recognizing the funded status of each defined pension benefit plan and other postretirement benefit plan on the Company's balance sheet. In the event a plan is overfunded, the Company recognizes an asset. Conversely, if a plan is underfunded, the Company recognizes a liability.

The following provides a reconciliation of the changes in the plans' benefit obligations, fair value of assets, and funded status as of December 31, 2011 and 2010:

			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
	(in thousands)
Change in benefit obligations:
Benefit obligation at January 1	$       67,933	$       56,736	$         4,955	$         3,271
Service cost	9,323	7,096	1,354	1,089
Interest cost	3,671	3,249	252	195
Participant contributions	0	0	19	15
Actuarial loss	6,967	6,311	302	462
Benefits paid	(6,156)	(5,029)	(89)	(77)
Plan amendments	0	168	0	0
Settlements	0	(598)	0	0
Benefit obligation at December 31	$       81,738	$       67,933	$         6,793	$         4,955
			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
	(in thousands)
Change in plan assets:
Fair value of plan assets at January 1	$       56,949	$       46,689	$                0	$                0
Actual return/(loss) on plan assets	4,717	6,276	0	0
Employer contributions	12,513	9,667	70	62
Participant contributions	0	0	19	15
Benefits paid	(6,156)	(5,029)	(89)	(77)
Settlements	0	(654)	0	0
Fair value of plan assets at December 31	$       68,023	$       56,949	$                0	$                0
Funded status of plans at December 31	$      (13,715)	$      (10,984)	$         (6,793)	$         (4,955)

The Company uses a December 31 measurement date for all of its plans and had liabilities recorded for the underfunded status for each period as presented above.

The change in accumulated other comprehensive income related to the pension plans was a loss of $5.4 million ($3.3 million after tax) for the year ended December 31, 2011 and a loss of $2.4 million ($1.2 million after tax) for the year ended December 31, 2010. The change in accumulated other comprehensive income related to the other postretirement benefit plan was a loss of $0.2 million ($0.1 million after tax) for the year ended December 31, 2011 and was a loss of  $0.4 million ($0.2 million after tax) for the year ended December 31, 2010. Included in accumulated other comprehensive income at December 31, 2011 and 2010 was a $26.2 million loss ($15.9 million net of tax) and a $20.5 million loss ($12.5 million net of tax), respectively, related to the Company's pension and other postretirement benefit plans.

The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during 2012 are $0.3 million for prior service costs, $1.2 million net loss and $0.1 million for transition obligation costs.

The pension plans' projected benefit obligation, accumulated benefit obligation and fair value of plan assets as of December 31, 2011 and 2010 are as follows:

	2011	2010
	(in thousands)
Projected benefit obligation	$          81,738	$          67,933
Accumulated benefit obligation	$          77,317	$          63,665
Fair value of plan assets	$          68,023	$          56,949

Pension and other postretirement benefit costs include the following components for 2011, 2010 and 2009:

				Other Postretirement
	Pension Benefits			Benefits
	2011	2010	2009	2011	2010	2009
	(in thousands)
Service cost	$    9,323	$    7,096	$    5,148	$     1,354	$     1,089	$        696
Interest cost	3,671	3,249	2,874	252	195	136
Expected return on plan assets	(4,398)	(3,503)	(2,809)	0	0	0
Amortization of transition obligation	0	0	0	64	65	65
Amortization of prior service cost	344	346	334	14	14	14
Amortization of net loss	856	806	846	11	21	7
Net periodic benefit cost	9,796	7,994	6,393	1,695	1,384	918
Settlements and curtailments	0	223	0	0	0	0
Total benefit cost	$    9,796	$    8,217	$    6,393	$     1,695	$     1,384	$        918

Amounts recognized in other comprehensive income for the year ended December 31, 2011 were as follows:

	Pension Benefits	Other Postretirement Benefits
	(in thousands)
Net actuarial loss arising during the year	$           (6,648)	$               (302)
Amortization of transition obligation	0	64
Amortization of prior service cost	344	14
Amortization of net loss	856	11
Tax effect	2,210	88
	$           (3,238)	$               (125)

The weighted average assumptions used in the measurement of the Company's benefit obligations at December 31, 2011 and 2010 are as follows:

			Other Postretirement
	Pension Benefits		Benefits
	2011	2010	2011	2010
Discount rate	5.00%	5.50%	5.00%	5.50%
Rate of compensation increase	4.50%	4.50%	n/a	n/a

The weighted average assumptions used in the measurement of the Company's net periodic benefit cost for 2011, 2010 and 2009 are as follows:

				Other Postretirement
	Pension Benefits			Benefits
	2011	2010	2009	2011	2010	2009
Discount rate	5.50%	5.75%	6.00%	5.50%	5.75%	6.00%
Expected return on plan assets	7.50%	7.50%	7.50%	n/a	n/a	n/a
Rate of compensation increase	4.50%	4.50%	4.50%	n/a	n/a	n/a

The expected return on plan assets for the various benefit plans is based upon a review of the historical returns experienced, combined with the future expected returns based upon the asset allocation strategy employed. The plans seek to achieve an adequate return to fund the obligations in a manner consistent with the federal standards of the Employee Retirement Income Security Act and with a prudent level of diversification.

For measurement purposes, the following trend rates were assumed for 2011 and 2010:

	2011	2010
Health care cost trend assumed for next year	9%	9%
Rate to which the cost trend is assumed to decline	5%	5%
Year that the rate reaches the ultimate trend rate	2031	2030

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:

	1% Increase	1% Decrease
	(in thousands)
Effect on the total service and interest cost components	$       235	$      (196)
Effect on postretirement benefit obligation	$       940	$      (788)

Pension Payments and Asset Management

In 2011, the Company contributed $12.5 million to its pension plans and $0.1 million to its other postretirement benefit plan. The Company expects to contribute $12.7 million to its pension plans and $0.2 million to its other postretirement benefit plan in 2012. No plan assets are expected to be returned to the Company during the next twelve months.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits	Other Postretirement Benefits
	(in thousands)
2012	$            3,894	$                150
2013	$            4,808	$                217
2014	$            6,310	$                322
2015	$            6,183	$                443
2016	$            7,908	$                657
Years 2017-2021	$          54,647	$             5,321

The Company's overall investment strategy is to provide an adequate pool of assets to support both the long-term growth of plan assets and to ensure adequate liquidity exists for the near-term benefit payment of obligations to participants, retirees and beneficiaries. The Retirement Committee of the Company's Board of Directors ("Retirement Committee") administers the Company's pension plan assets. The Retirement Committee believes long-term investment performance is a function of asset-class mix and restricts the composition of pension plan assets to a combination of cash and cash equivalents, domestic equity markets, international equity markets or investment grade fixed income assets.

The table below presents the allocations targeted by the Retirement Committee and the actual weighted-average asset allocation of the Company's pension plan at December 31, 2011, by asset category. The asset allocation targets are subject to change and the Retirement Committee allows for its actual allocations to deviate from target as a result of current and anticipated market conditions.  Plan assets are periodically balanced whenever the allocation to any asset class falls outside of the specified range.

	Pension Plan Asset Allocations
Asset category:	Target	Actual
Equity securities:
U.S. large cap growth equity	6%	6%
U.S. large cap value equity	6%	5%
U.S. large cap core equity	15%	16%
U.S. small cap equity	3%	3%
Non-U.S. equity	25%	25%
Emerging markets equity	5%	5%
Fixed income and cash and cash equivalents	40%	40%
Total	100%	100%

Utilizing GAAP's fair value hierarchy, the Company's fair value measurement of pension plan assets at December 31, 2011 are as follows:

		Quoted Prices in Active Markets for Identical Assets	Significant Observable Inputs	Significant Unobservable Inputs
Asset category:	Total	(Level 1)	(Level 2)	(Level 3)
	(in thousands)
Equity securities:
U.S. large cap growth equity (1)	$         3,792	$         3,792	$               0	$               0
U.S. large cap value equity (2)	3,689	3,689	0	0
U.S. large cap core equity (3)	10,849	0	10,849	0
U.S. small cap equity (4)	2,201	2,201	0	0
Non-U.S. equity (5)	16,719	16,719	0	0
Emerging markets equity (6)	3,377	0	3,377	0
Fixed income (7)	25,192	0	25,192	0
Cash and cash equivalents	2,204	2,204	0	0
Total	$       68,023	$       28,605	$               39,418	$               0

(1) Mutual fund that seeks to invest in a diversified portfolio of stocks with price appreciation growth opportunities.

(2) Mutual fund that seeks to invest in a diversified portfolio of stocks that will increase in value over the long-term as well as provide current income.

(3) An institutional fund that seeks to replicate the performance of the S&P 500 Index before fees.

(4) Mutual fund that seeks to invest in a diversified portfolio of stocks with small market capitalizations.

(5) Mutual funds that invest primarily in equity securities of companies domiciled outside of the United States, primarily in developed markets.

(6) An institutional fund that invests primarily in the equity securities of companies domiciled in emerging markets.

(7) An institutional fund that seeks to replicate the performance of the Barclays Capital Long-Term Corporate Bond Index before fees through a sampling process.

Utilizing GAAP's fair value hierarchy, the Company's fair value measurement of pension plan assets at December 31, 2010 are as follows:

		Quoted Prices in Active Markets for Identical Assets	Significant Observable Inputs	Significant Unobservable Inputs
Asset category:	Total	(Level 1)	(Level 2)	(Level 3)
	(in thousands)
Equity securities:
Large cap growth equity (1)	$         5,937	$         5,937	$               0	$               0
Large cap value equity (2)	5,838	5,838	0	0
Large cap core equity (3)	8,062	8,062	0	0
Small cap equity (4)	6,662	6,662	0	0
International equity (5)	8,333	8,333	0	0
Fixed income (6)	18,539	18,539	0	0
Cash and cash equivalents	3,578	3,578	0	0
Total	$       56,949	$       56,949	$               0	$               0

(1) Mutual fund that seeks to invest in a diversified portfolio of stocks with price appreciation growth opportunities.

(2) Mutual fund that seeks to invest in a diversified portfolio of stocks that will increase in value over the long-term as well as provide current income.

(3) Mutual fund that seeks to replicate the Standards & Poor's 500 index by investing at least 80% of assets in S&P 500 stocks.

(4) Mutual fund that seeks to invest in a diversified portfolio of stocks with small market capitalizations.

(5) Mutual fund that seeks to invest in a diversified portfolio of stocks and fixed income securities with at least 80% of its investments in securities issued in Europe or the Pacific Basin.

(6) Mutual fund that seeks to invest in a diversified portfolio of bonds with investment grade quality United States ("U.S.") dollar-denominated securities of U.S. issuers.

The Company's pension plan assets that are classified as Level 1 are due to the pension plan's investments comprising either cash or investments in open-ended mutual funds which produce a daily net asset value that is validated with a sufficient level of observable activity to support classification of the fair value measurement as Level 1. The Company's Level 2 pension plan assets represent investments in institutional funds. These equity securities can be redeemed on demand but are not actively traded.  The fair values of these Level 2 securities are based upon the net asset values provided by the investment managers. No concentration of risk arising within or across categories of plan assets exists due to any significant investments in a single entity, industry, country or investment fund.

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Debt

12 Months Ended

Dec. 31, 2011

Debt [Abstract]

Debt

(7)   DEBT

The components of debt as of December 31, 2011 and 2010 consisted of the following:

	2011		2010
	(in thousands)
Short-term debt:
7.15% Senior Notes due 2018	$                1,200	$                1,200
Total short-term debt	1,200	1,200
Long-term debt:
Variable rate (2.276% at December 31, 2011 and 0.887% at December 31, 2010) unsecured revolving credit facility, expires February 2016	671,500	421,200
7.5% Senior Notes due 2018	600,000	600,000
7.35% Senior Notes due 2017	15,000	15,000
7.125% Senior Notes due 2017	25,000	25,000
7.15% Senior Notes due 2018	30,600	31,800
	1,342,100	1,093,000
Total debt	$        1,343,300	$        1,094,200

The following is a summary of scheduled long-term debt maturities by year as of December 31, 2011 (in thousands):

2012	$                1,200
2013	1,200
2014	1,200
2015	1,200
2016	672,700
Thereafter	665,800
	$       1,343,300

Issuance of Senior Notes and Subsidiary Guarantees 

In January 2008, the Company completed an offering of $600 million Senior Notes with a coupon rate of 7.5% ("7.5% Senior Notes"), a maturity in February 2018 and semi-annual interest payments. Upon a "change of control," as defined in the indenture, holders have the option to require the Company to purchase all or any portion of the notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest before the change of control date.

The indentures governing the Company's senior notes contain covenants that, among other things, restrict the ability of the Company and/or its subsidiaries' ability to incur liens, to engage in sale and leaseback transactions and to merge, consolidate or sell assets. All of the Company's senior notes are currently guaranteed by its subsidiaries, SEECO, Inc. ("SEECO"), Southwestern Energy Production Company ("SEPCO") and Southwestern Energy Services Company ("SES"). If no default or event of default has occurred and is continuing, these guarantees will be released (i) automatically upon any sale, exchange or transfer of all of the Company's equity interests in the guarantor; (ii) automatically upon the liquidation and dissolution of a guarantor; (iii) following delivery of notice to the trustee of the release of the guarantor of its obligations under the Company's credit facility; and (iv) upon legal or covenant defeasance or other satisfaction of the obligations under the notes.

Please refer to Note 15, "Condensed Consolidating Financial Information" in this Form 10-K for additional information.

Credit Facility 

In February 2011, the Company amended and restated its unsecured revolving credit facility, increasing the borrowing capacity to $1.5 billion and extending the maturity date to February 2016 ("Credit Facility"). The amount available under the Credit Facility may be increased to $2.0 billion at any time upon the Company's agreement with its existing or additional lenders. The Company had $671.5 and $421.2 million outstanding under its revolving credit facility at December 31, 2011 and December 31, 2010, respectively. The interest rate on the amended credit facility is calculated based upon our debt rating and is currently 200 basis points over the current London Interbank Offered Rate (LIBOR) and was 200 basis points over LIBOR at December 31, 2011. The Credit Facility is guaranteed by the Company's subsidiary, SEECO. The Credit Facility requires additional subsidiary guarantors if certain guaranty coverage levels are not satisfied. The revolving credit facility contains covenants which impose certain restrictions on the Company. Under the credit agreement, the Company may not issue total debt in excess of 60% of its total capital and must maintain a ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) to interest expense of 3.5 or above. The terms of the Credit Facility also include covenants that restrict the ability of the Company and its material subsidiaries to merge, consolidate or sell all or substantially all of their assets, restrict the ability of the Company and its subsidiaries to incur liens and restrict the ability of the Company's subsidiaries to incur indebtedness.At December 31, 2011, the Company's capital structure consisted of 25% debt and 75% equity and it was in compliance with the covenants of its debt agreements. While the Company believes all of the lenders under the Credit Facility have the ability to provide funds, it cannot predict whether each will be able to meet its obligation under the facility.

Interest Payments

Total cash interest payments made by the Company were $64.8 million in 2011, $57.0 million in 2010 and $56.7 million in 2009.

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Income Taxes (Net Deferred Tax Liability) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Deferred tax liabilities:
Differences between book and tax basis of property	$ 1,916,619	$ 1,411,240
Cash flow hedges	276,063	61,394
Other	15,755	14,122
Total deferred tax liabilities	2,208,437	1,486,756
Deferred tax assets:
Accrued compensation	30,316	16,279
Alternative minimum tax credit carryforward	73,516	70,138
Stored natural gas	9,053	7,145
Accrued pension costs	3,982	6,227
Asset retirement obligations	13,188	10,848
Net operating loss carryforward	287,830	192,086
Other	9,591	9,652
Total deferred tax assets	427,476	312,375
Net deferred tax liability	1,780,961	1,174,381
Canada [Member]
Deferred tax assets:
Net operating loss carryforward	$ 11,000

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Derivatives and Risk Management

12 Months Ended

Dec. 31, 2011

Derivatives And Risk Management [Abstract]

Derivatives and Risk Management

(5)  DERIVATIVES AND RISK MANAGEMENT

The Company is exposed to volatility in market prices and basis differentials for natural gas and crude oil which impacts the predictability of its cash flows related to the sale of natural gas and oil. These risks are managed by the Company's use of certain derivative financial instruments. At December 31, 2011 and 2010, the Company's derivative financial instruments consisted of price swaps, costless-collars and basis swaps. A description of the Company's derivative financial instruments is provided below:

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

Floating price swaps          The Company receives a floating market price from the counterparty and pays a fixed price.

Costless-collars                   Arrangements that contain a fixed floor price (put) and a fixed ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, the Company receives the fixed price and pays the market price. If the market price is between the call and the put strike price, no payments are due from either party.

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

GAAP requires that all derivatives be recognized in the balance sheet as either an asset or liability and be measured at fair value. Under GAAP, certain criteria must be satisfied in order for derivative financial instruments to be classified and accounted for as either a cash flow or a fair value hedge. Accounting for qualifying hedges requires a derivative's gains and losses to be recorded either in earnings or as a component of other comprehensive income. Gains and losses on derivatives that are not elected for hedge accounting treatment or that do not meet hedge accounting requirements are recorded in earnings.

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

The balance sheet classification of the derivative financial instruments are summarized below at December 31, 2011 and 2010:

	Derivative Assets
	December 31, 2011		December 31, 2010
	Balance Sheet Classification	Fair Value	Balance Sheet Classification	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Fixed and floating price swaps	Hedging asset	$        333,479	Hedging asset	$          81,797
Costless-collars	Hedging asset	179,080	Hedging asset	48,582
Fixed and floating price swaps	Other assets	201,081	Other assets	5,086
Costless-collars	Other assets	0	Other assets	72,827
Total derivatives designated as hedging instruments		$        713,640		$        208,292
Derivatives not designated as hedging instruments:
Basis swaps	Hedging asset	$             1,906	Hedging asset	$                 33
Basis swaps	Other assets	1,797	Other assets	0
Total derivatives not designated as hedging instruments		$             3,703		$                 33
Total derivative assets		$        717,343		$        208,325
	Derivative Liabilities
	December 31, 2011		December 31, 2010
	Balance Sheet Classification	Fair Value	Balance Sheet Classification	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Fixed and floating price swaps	Hedging liability	$          11,849	Hedging liability	$            1,774
Costless-collars	Hedging liability	209	Hedging liability	3,903
Fixed and floating price swaps	Long-term hedging liability	0	Long-term hedging liability	22,334
Costless-collars	Long-term hedging liability	0	Long-term hedging liability	17,854
Total derivatives designated as hedging instruments		$          12,058		$          45,865
Derivatives not designated as hedging instruments:
Basis swaps	Hedging liability	$               400	Hedging liability	$            2,008
Basis swaps	Long-term hedging liability	55	Long-term hedging liability	0
Total derivatives not designated as hedging instruments		$               455		$            2,008
Total derivative liabilities		$          12,513		$          47,873

Cash Flow Hedges

The reporting of gains and losses on cash flow derivative hedging instruments depends on whether the gains or losses are effective at offsetting changes in the cash flows of the hedged item. The effective portion of the gains and losses on the derivative hedging instruments are recorded in other comprehensive income until recognized in earnings during the period that the hedged transaction takes place. The ineffective portion of the gains and losses from the derivative hedging instrument recognized in earnings immediately.

As of December 31, 2011, the Company had cash flow hedges on the following volumes of natural gas production and gas-in-underground storage (in Bcf):

Year:	Fixed price swaps	Costless-collars
2012	185.9	80.5
2013	185.2	0

As of December 31, 2011, the Company recorded a gain in accumulated other comprehensive income related to its hedging activities of $424.9 million net of a deferred income tax liability of $276.2 million. The amount recorded in accumulated other comprehensive income will be relieved over time and recognized in the statement of operations as the physical transactions being hedged occur. Assuming the market prices of natural gas futures as of December 31, 2011 remain unchanged, the Company would expect to transfer an aggregate after-tax net gain of approximately $303.2 million from accumulated other comprehensive income to earnings during the next 12 months. Gains or losses from derivative instruments designated as cash flow hedges are reflected as adjustments to natural gas sales in the consolidated statements of operations. Natural gas sales included a realized gain from settled contracts of $320.1 million for the year ended December 31, 2011 compared to a realized gain of $301.5 million for the year ended December 31, 2010. Volatility in  net income, comprehensive income and accumulated other comprehensive income may occur in the future as a result of the Company's derivative activities.

The following tables summarize the before tax effect of all cash flow hedges on the consolidated financial statements for the years ended December 31, 2011 and 2010.

		Gain Recognized in Other Comprehensive Income (Effective Portion)
		For the years ended
		December 31,
Derivative Instrument		2011	2010
		(in thousands)
Fixed price swaps		$    714,740	$    166,722
Costless-collars		$    144,126	$    132,438
	Classification of Gain Reclassified from Accumulated Other	Gain Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)
	Comprehensive Income	For the years ended
	into Earnings	December 31,
Derivative Instrument	(Effective Portion)	2011	2010
		(in thousands)
Fixed price swaps	Gas Sales	$    256,229	$    230,707
Costless-collars	Gas Sales	$      65,047	$      70,775
		Loss Recognized in Earnings (Ineffective Portion)
	Classification of Loss	For the years ended
	Recognized in Earnings	December 31,
Derivative Instrument	(Ineffective Portion)	2011	2010
		(in thousands)
Fixed price swaps	Gas Sales	$      (4,018)	$       (4,769)
Costless-collars	Gas Sales	$         (137)	$       (1,999)

Fair Value Hedges

For fair value hedges, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item are recognized in earnings immediately. As of December 31, 2011 and December 31, 2010, the Company had no material fair value hedges.

 Other Derivative Contracts

Although the Company's basis swaps meet the objective of managing commodity price exposure, these trades are typically not entered into concurrent with the Company's derivative instruments that qualify as cash flow hedges and therefore do not generally qualify for hedge accounting. Basis swap derivative instruments that do not qualify as cash flow hedges are recorded on the balance sheet at their fair values under hedging assets, other assets and hedging liabilities, as applicable, and all realized and unrealized gains and losses related to these contracts are recognized immediately in the consolidated statements of operations as a component of natural gas sales.

As of December 31, 2011, the Company had basis swaps on natural gas production that did not qualify for hedge accounting treatment of 36.6 Bcf, 30.1 Bcf and 9.1 Bcf for 2012, 2013, and 2014, respectively.

The following tables summarize the before tax effect of basis swaps that did not qualify for hedge accounting on the uncondensed consolidated statements of operations for the years ended December 31, 2011 and 2010.

		Unrealized Gain Recognized in Earnings
	Income Statement	For the years ended
	Classification	December 31,
Derivative Instrument	of Unrealized Gain	2011	2010
		(in thousands)
Basis swaps	Gas Sales	$        5,222	$      11,434
		Realized Loss Recognized in Earnings
	Income Statement	For the years ended
	Classification	December 31,
Derivative Instrument	of Realized Loss	2011	2010
		(in thousands)
Basis swaps	Gas Sales	$      (2,135)	$     (12,098)

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Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

(6)  FAIR VALUE MEASUREMENTS

The carrying amounts and estimated fair values of the Company's financial instruments as of December 31, 2011 and 2010 were as follows:

	December 31, 2011		December 31, 2010
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
	(in thousands)
Cash and cash equivalents	$          15,627	$         15,627	$          16,055	$          16,055
Unsecured revolving credit facility	$        671,500	$       671,500	$        421,200	$        421,200
Senior notes	$        671,800	$       773,578	$        673,000	$        761,372
Derivative instruments, net	$        704,830	$        704,830	$        160,452	$        160,452

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, other current assets and current liabilities on the condensed 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 were based on the market for the Company's publicly-traded debt as determined based on yield of the Company's 7.5% Senior Notes due 2018, which was 4.6% at December 31, 2011 and 5.2% at December 31, 2010. The carrying values of the borrowings under the Company's unsecured revolving credit facility at December 31, 2011 and 2010 approximate fair value.

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

GAAP establishes a fair value hierarchy that 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.

Pursuant to GAAP, the Company has classified its derivatives into these levels depending upon the data utilized to determine their fair values. The Company's Level 2 fair value measurements include fixed-price and floating-price swaps and are estimated using internal discounted cash flow calculations using the NYMEX futures index. The Company's Level 3 fair value measurements include costless-collars and basis swaps. The Company's costless-collars are valued using the Black-Scholes model, an industry standard option valuation model, and takes into account inputs such as contract terms, including maturity, and market parameters, including assumptions of the NYMEX futures index, interest rates, volatility and credit worthiness. The Company's basis swaps are estimated using internal discounted cash flow calculations based upon forward commodity price curves. 

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

	December 31, 2011
	Fair Value Measurements Using:
	Quoted Prices	Significant
	in Active	Other	Significant
	Markets	Observable Inputs	Unobservable Inputs	Assets (Liabilities)
	(Level 1)	(Level 2)	(Level 3)	at Fair Value
Derivative assets	$                      0	$                 534,560	$                     182,783	$              717,343
Derivative liabilities	0	(11,849)	(664)	(12,513)
Total	$                      0	$                 522,711	$                     182,119	$              704,830
	December 31, 2010
	Fair Value Measurements Using:
	Quoted Prices	Significant
	in Active	Other	Significant
	Markets	Observable Inputs	Unobservable Inputs	Assets (Liabilities)
	(Level 1)	(Level 2)	(Level 3)	at Fair Value
Derivative assets	$                      0	$                   86,883	$                    121,442	$              208,325
Derivative liabilities	0	(24,108)	(23,765)	(47,873)
Total	$                      0	$                   62,775	$                      97,677	$              160,452

The table below presents reconciliations for the change in net fair value of derivative assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and 2010. Level 3 instruments presented in the table consist of net derivatives valued using pricing models incorporating assumptions that, in the Company's judgment, reflect the assumptions a marketplace participant would have used at December 31, 2011 and at December 31, 2010.

Total net gains and losses for Level 3 derivatives for the years ended December 31, 2011 and 2010 are provided below:

	For the years ended December 31,
	2011	2010
	(in thousands)
Balance at beginning of period	$           97,677	$           24,720
Total gains or losses (realized/unrealized):
Included in earnings	67,998	68,111
Included in other comprehensive income	79,215	63,522
Purchases, issuances and settlements
Purchases	—	—
Issuances	—	—
Settlements	(62,913)	(58,676)
Transfers into/out of Level 3	142	—
Balance at end of period	$         182,119	$           97,677
Change in unrealized gain (loss) included in earnings relating to derivatives still held as of December 31	$              5,085	$              9,435

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(8) COMMITMENTS AND CONTINGENCIES

Operating Commitments and Contingencies

The Company has commitments to third parties for demand transportation charges. At December 31, 2011, future payments under non-cancelable demand charges are approximately $212.2 million in 2012, $218.8 million in 2013, $234.3 million in 2014, $233.7 million in 2015, $236.2 million in 2016 and $960.5 million thereafter.

Southwestern leases 14 drilling rigs and equipment for its E&P operations under leases that expire on January 1, 2015. The Company's current aggregate annual payment under the leases is approximately $19.4 million. The lease payments for the drilling rigs and equipment, as well as other operating expenses for the Company's drilling operations, are capitalized to natural gas and oil properties and are partially offset by billings to third-party working interest owners for their share of rig day-rate charges.

The Company leases compressors, aircraft, vehicles, office space and equipment under non-cancelable operating leases expiring through 2019. At December 31, 2011, future minimum payments under these non-cancelable leases accounted for as operating leases are approximately $69.9 million in 2012, $65.0 million in 2013, $57.7 million in 2014, $33.5 million in 2015, $25.9 million in 2016 and $16.2 million thereafter. The Company also has commitments for compression services related to its Midstream Services and E&P segments. At December 31, 2011, future minimum payments under these non-cancelable agreements are approximately $42.1 million in 2012, $30.0 million in 2013, $15.7 million in 2014, $9.6 million in 2015, $8.0 million in 2016 and $1.7 million thereafter.

During 2011, SES entered into a number of short and long term firm transportation service and gathering agreements in support of our growing Marcellus Shale operations in Pennsylvania. In March 2011, SES entered into a precedent agreement with Millennium Pipeline Company, L.L.C. pursuant to which it will enter into short and long term firm natural gas transportation services on Millennium's existing system and expansions of the system are expected to be in-service by late 2012 and late 2013.  In June 2011, SES entered into a long term agreement with Bluestone Gathering, a wholly owned subsidiary of DTE Energy Company, pursuant to which Bluestone Gathering will build and operate a natural gas gathering system in Susquehanna County, Pennsylvania and Broome County, New York, and provide gathering services to SES in support of a portion of our future Marcellus Shale natural gas production.  The projected in-service date for the gathering system is expected to be during the third quarter of 2012.  SES also executed firm transportation agreements with Tennessee Gas Pipeline Company ("TGP") that increase our ability to move its Marcellus Shale natural gas production in the short term to market as well as a precedent agreement for an expansion project with a projected in-service date of November 2013 pursuant to which SES has subscribed for 100,000 Dekatherm/day of capacity.  TGP's expansion project will expand its 300 Line in Pennsylvania to provide natural gas transportation from the Marcellus Shale supply area to existing delivery points on the TGP system.  TGP filed a certificate application for the project with the Federal Energy Regulatory Commission in late 2011. Pending regulatory approvals, construction would begin in 2013, with a November 1, 2013 in-service date.  

We have provided certain guarantees of a portion of SES's obligations under these agreements.  As of December 31, 2011, SES's obligations for demand and similar charges under the firm transportation agreements totaled approximately $2.1 billion and we currently have not recognized any guarantee obligations with respect to the firm transportation agreements and the gathering project and services.  

On October 6, 2011, the Company's subsidiary, Southwestern Energy Production Company ("SEPCO"), entered into a 15-year agreement with a subsidiary of Boardwalk Pipeline Partners for the construction of a gathering system in Susquehanna and Lackawanna counties in Pennsylvania, which once constructed is expected to have a delivery capacity of 275,000 Dekatherm/day.

In the first quarter of 2010, the Company was awarded exclusive licenses by the Province of New Brunswick in Canada to conduct an exploration program covering approximately 2.5 million acres in the province. The licenses require the Company to make certain capital investments in New Brunswick of approximately $47 million Canadian dollars ("CAD") in the aggregate over a three year period. In order to obtain the licenses, the Company provided promissory notes payable on demand to the Minister of Finance of the Province of New Brunswick with an aggregate principal amount of CAD $44.5 million. The promissory notes secure the Company's capital expenditure obligations under the licenses and are returnable to the Company to the extent the Company performs such obligations. If the Company fails to fully perform, the Minister of Finance may retain a portion of the applicable promissory notes in an amount equal to any deficiency. The Company commenced its Canada exploration program in 2010 and, as of December 31, 2011 had invested CAD $28.5 million in New Brunswick. No liability has been recognized in connection with the promissory notes due to the Company's investments in New Brunswick as of December 31, 2011 and its future investment plans.

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 or reported results of operations of the Company.

Litigation

In February 2009, SEPCO was added as a defendant in a Third Amended Petition in the matter of Tovah Energy, LLC and Toby Berry-Helfand v. David Michael Grimes, et, al.  In the Sixth Amended Petition, filed in July 2010, in the 273rd District Court in Shelby County, Texas (collectively, the "Sixth Petition") plaintiff alleged that, in 2005, they provided SEPCO with proprietary data regarding two prospects in the James Lime formation pursuant to a confidentiality agreement and that SEPCO refused to return the proprietary data to the plaintiff, subsequently acquired leases based upon such proprietary data and profited therefrom.  Among other things, the plaintiff's allegations in the Sixth Petition included various statutory and common law claims, including, but not limited to claims of misappropriation of trade secrets, violation of the Texas Theft Liability Act, breach of fiduciary duty and confidential relationships, various fraud based claims and breach of contract, including a claim of breach of a purported right of first refusal on all interests acquired by SEPCO between February 15, 2005 and February 15, 2006.  In the Sixth Petition, plaintiff sought actual damages of over $55 million as well as other remedies, including special damages and punitive damages of four times the amount of actual damages established at trial.

Immediately before the commencement of the trial in November 2010, plaintiff was permitted, over SEPCO's objections, to file a Seventh Amended Petition claiming actual damages of $46 million and also seeking the equitable remedy of disgorgement of all profits for the misappropriation of trade secrets and the breach of fiduciary duty claims. In December 2010, the jury found in favor of the plaintiff with respect to all of the statutory and common law claims and awarded $11.4 million in compensatory damages. The jury did not, however, award the plaintiff any special, punitive or other damages. In addition, the jury separately determined that SEPCO's profits for purposes of disgorgement were $381.5 million. This profit determination does not constitute a judgment or an award. The plaintiff's entitlement to disgorgement of profits as an equitable remedy will be determined by the judge and it is within the judge's discretion to award none, some or all the amount of profit to the plaintiff.  On December 31, 2010, the plaintiff filed a motion to enter the judgment based on the jury's verdict.  On February 11, 2011, SEPCO filed a motion for a judgment notwithstanding the verdict and a motion to disregard certain findings.  On March 11, 2011, the plaintiff filed an amended motion for judgment and intervenor filed its motion for judgment seeking not only the monetary damages and the profits determined by the jury but also seeking, as a new remedy, a constructive trust for profits from 143 wells as well as future drilling and sales of properties in the prospect areas.  A hearing on the post-verdict motions was held on March 14, 2011.  At the suggestion of the judge, all parties voluntarily agreed to participate in non-binding mediation efforts.  The mediation occurred on April 6, 2011 and was unsuccessful. On June 6, 2011, SEPCO received by mail a letter dated June 2, 2011 from the judge, in which he made certain rulings with respect to the post-verdict motions and responses filed by the parties. In his rulings, the judge denied SEPCO's motion for judgment, judgment notwithstanding the verdict and to disregard certain findings. Plaintiff's and intervenor's claim for a constructive trust was denied but the judge ruled that plaintiff and intervenor shall recover from SEPCO $11.4 million and a reasonable attorney's fee of 40% of the total damages awarded and are entitled to recover on their claim for disgorgement.  The judge instructed that SEPCO calculate the profit on the designated wells for each respective period.  SEPCO performed the calculation and provided it to the judge in June 2011.  On July 5, 2011, plaintiff and intervenor filed a letter with the court raising objections to the accounting provided by SEPCO, to which SEPCO filed a response on July 11, 2011.  On July 12, 2011, the judge sent a letter to the parties in which he ruled that after reviewing the parties' respective position letters, he was awarding $23.9 million in disgorgement damages in favor of the plaintiff and intervenor.  In the July 12, 2011 letter, the judge instructed the plaintiff and intervenor to prepare a judgment for his approval prior to July 21, 2011 consistent with his findings in his June 2, 2011 letter and the disgorgement award.  On August 24, 2011, a judgment was entered pursuant to which plaintiff and intervenor are entitled to recover approximately $11.4 million in actual damages and approximately $23.9 million in disgorgement as well as prejudgment interest and attorneys' fees which currently are estimated to be up to $8.9 million and all costs of court of the plaintiff and intervenor. On September 23, 2011, SEPCO filed a motion for a new trial and on November 18, 2011 filed a notice of appeal. On November 30, 2011, the court approved SEPCO's supersedeas bond in the amount of $14.1 million, which stays execution on the judgment pending appeal. The bond covers the $11.4 million judgment for actual damages, plus $1.3 million in pre-judgment interest, $1.3 million in post-justment interest (estimating two years for the duration of appeal), and court costs.

The Company believes that SEPCO has a number of legal grounds for appealing the judgment, all of which will be vigorously pursued.  Based on the Company's understanding and judgment of the facts and merits of this case, including appellate defenses, and after considering the advice of counsel, the Company has determined that, although reasonably possible after exhaustion of all appeals, an adverse final outcome to this lawsuit is not probable.  As such, the Company has not accrued any amounts with respect to this lawsuit.  If the plaintiff and intervenor were to ultimately prevail in the appellate process, the Company currently estimates, based on the judgments to date, that SEPCO's potential liability would be up to $44.2 million, including interest and attorney's fees.  The Company's assessment may change in the future due to occurrence of certain events, such as denied appeals, and such re-assessment could lead to the determination that the potential liability is probable and could be material to the Company's results of operations, financial position or cash flows.

On February 20, 2012, the Company became aware that SEPCO was named as a defendant in the matter of Gery Muncey v. Southwestern Energy Production Company, et al filed in the District Court of San Augustine County in Texas on January 31, 2012. The plaintiff in this case is also the intervenor in the Tovah Energy matter described above and alleges various claims including fraud, misappropriation and breach of fiduciary duty that are purported as independent of the claims alleged in the Tovah Energy matter, but arise from the substantially same circumstances involved in the Tovah Energy matter. The plaintiff is seeking value for various royalty and override ownership interests in wells drilled, disgorgement of profits and punitive damages. The Company has not accrued any amounts with respect to this lawsuit and cannot reasonably estimate the amount of any potential liability based on the Company's understanding and judgment of the facts and merits of this case.

In March 2010, the Company's subsidiary, SEECO, Inc., was served with a subpoena from a federal grand jury in Little Rock, Arkansas.  Based on the documents requested under the subpoena and subsequent discussions described below, the Company believes the grand jury is investigating matters involving approximately 27 horizontal wells operated by SEECO in Arkansas, including whether appropriate leases or permits were obtained therefor and whether royalties and other production attributable to federal lands have been properly accounted for and paid.  The Company believes it has fully complied with all requests related to the federal subpoena and delivered its affidavit to that effect. The Company and representatives of the Bureau of Land Management and the U.S. Attorney have had discussions since the production of the documents pursuant to the subpoena.  In January 2011, the Company voluntarily produced additional materials informally requested by the government arising from these discussions.  Although, to the Company's knowledge, no proceeding in this matter has been initiated against SEECO, the Company cannot predict whether or when one might be initiated. The Company intends to fully comply with any further requests and to cooperate with any related investigation. No assurance can be made as to the time or resources that will need to be devoted to this inquiry or the impact of the final outcome of the discussions or any related proceeding.

We are subject to various litigation, claims and proceedings that have arisen in the ordinary course of business. Management believes, individually or in aggregate, such litigation, claims and proceedings will not have a material adverse impact on our financial position or our results of operations but these matters are subject to inherent uncertainties and management's view may change in the future. If an unfavorable final outcome were to occur, there exists the possibility of a material impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. We accrue for such items when a liability is both probable and the amount can be reasonably estimated.

Indemnifications

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

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Retirement and Employee Benefit Plans (Projected Benefit Obligation, Accumulated Benefit Obligation and Fair Value of Plan Assets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Retirement and Employee Benefit Plans [Abstract]
Projected benefit obligation	$ 81,738	$ 67,933
Accumulated benefit obligation	77,317	63,665
Fair value of plan assets	$ 68,023	$ 56,949

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Retirement and Employee Benefit Plans (Amounts Recognized in Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Tax effect	$ (2,700)	$ (2,000)	$ (200)
Pension Benefits [Member]
Net actuarial loss arising during the year	(6,648)
Amortization of transition obligation	0
Amortization of prior service cost	344
Amortization of net loss	856
Tax effect	2,210
Total	(3,238)
Other Postretirement Benefits [Member]
Net actuarial loss arising during the year	(302)
Amortization of transition obligation	64
Amortization of prior service cost	14
Amortization of net loss	11
Tax effect	88
Total	$ (125)

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Retirement and Employee Benefit Plans (Changes in the Plans Benefit Obligations, Fair Value of Assets, and Funded Status) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Pension Benefits [Member]
Service cost	$ 9,323	$ 7,096	$ 5,148
Interest cost	3,671	3,249	2,874
Employer contributions	12,500
Pension Benefits [Member] | Change In Benefit Obligation [Member]
Benefit obligation at January 1	67,933	56,736
Service cost	9,323	7,096
Interest cost	3,671	3,249
Actuarial loss	6,967	6,311
Benefits paid	(6,156)	(5,029)
Plan amendments	0	168
Settlements	0	(598)
Benefit obligation at December 31	81,738	67,933
Participant contributions	0	0
Pension Benefits [Member] | Change In Plan Assets [Member]
Benefits paid	(6,156)	(5,029)
Fair value of plan assets at January 1	56,949	46,689
Actual return/(loss) on plan assets	4,717	6,276
Employer contributions	12,513	9,667
Participant contributions	0	0
Settlements	0	(654)
Fair value of plan assets at December 31	68,023	56,949
Funded status of plans at December 31	(13,715)	(10,984)
Other Postretirement Benefits [Member]
Service cost	1,354	1,089	696
Interest cost	252	195	136
Employer contributions	100
Other Postretirement Benefits [Member] | Change In Benefit Obligation [Member]
Benefit obligation at January 1	4,955	3,271
Service cost	1,354	1,089
Interest cost	252	195
Actuarial loss	302	462
Benefits paid	(89)	(77)
Plan amendments	0	0
Settlements	0	0
Benefit obligation at December 31	6,793	4,955
Participant contributions	19	15
Other Postretirement Benefits [Member] | Change In Plan Assets [Member]
Benefits paid	(89)	(77)
Fair value of plan assets at January 1	0	0
Actual return/(loss) on plan assets	0	0
Employer contributions	70	62
Participant contributions	19	15
Settlements	0	0
Fair value of plan assets at December 31	0	0
Funded status of plans at December 31	$ (6,793)	$ (4,955)

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2011

Assumptions

Assumptions	2011	2010	2009
Risk-free interest rate	0.9%	2.0%	2.2%
Expected dividend yield	0	0	0
Expected volatility	58.1%	60.1%	61.6%
Expected term	5 years	5 years	5 years

Summary of Stock Option Activity, Options Outstanding

	2011		2010		2009
		Weighted		Weighted		Weighted
		Average		Average		Average
	Number	Exercise	Number	Exercise	Number	Exercise
	of Shares	Price	of Shares	Price	of Shares	Price
Options outstanding at January 1	4,769,122	$     16.13	5,649,233	$     11.59	7,396,537	$       7.44
Granted	853,478	36.64	446,895	37.05	412,515	39.83
Exercised	(850,659)	7.54	(1,293,046)	3.01	(2,152,819)	2.67
Forfeited or expired	(30,209)	35.46	(33,960)	35.26	(7,000)	31.21
Options outstanding at December 31	4,741,732	$     21.24	4,769,122	$     16.13	5,649,233	$     11.59

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Text Block]

	Options Outstanding				Options Exercisable
			Weighted				Weighted
			Average				Average
		Weighted	Remaining	Aggregate		Weighted	Remaining	Aggregate
	Options	Average	Contractual	Intrinsic	Options	Average	Contractual	Intrinsic
Range of	Outstanding at	Exercise	Life	Value	Exercisable at	Exercise	Life	Value
Exercise Prices	December 31, 2011	Price	(Years)	(in thousands)	December 31, 2011	Price	(Years)	(in thousands)
$1.43 - $3.10	1,727,398	$    2.10	1.5		1,727,398	$    2.10	1.5
$3.11 - $30.00	862,650	22.19	2.1		856,544	22.14	2.1
$30.01 - $36.00	606,133	31.54	4.4		490,190	31.11	4.0
$36.01 - $40.00	1,130,705	36.77	6.5		153,086	36.86	5.5
$40.01 - $51.47	414,846	41.60	5.0		254,850	41.50	4.8
	4,741,732	$  21.24	3.5	$  60,505	3,482,068	$  15.53	2.4	$ 60,484

Summary of Restricted Stock Activity and Unvested Shares

	2011		2010		2009
		Weighted		Weighted		Weighted
		Average		Average		Average
	Number	Grant Date	Number	Grant Date	Number	Grant Date
	of Shares	Fair Value	of Shares	Fair Value	of Shares	Fair Value
Unvested shares at January 1	834,058	$     36.24	794,529	$     33.70	843,430	$     27.66
Granted	532,754	36.41	390,415	36.46	319,950	39.03
Vested	(294,358)	34.90	(319,894)	30.45	(359,247)	24.37
Forfeited	(52,717)	36.45	(30,992)	33.54	(9,604)	29.47
Unvested shares at December 31	1,019,737	$     36.71	834,058	$     36.24	794,529	$     33.70

Stock Options [Member]

Employee Stock-Based Compensation Costs Table

	2011	2010	2009
	(in thousands)
Stock-based compensation cost related to stock options – general and administrative expense	$            4,959	$            4,706	$            5,108
Stock-based compensation cost related to stock options – capitalized	$            3,365	$            2,679	$            2,124

Restricted Stock [Member]

Employee Stock-Based Compensation Costs Table

	2011	2010	2009
	(in thousands)
Stock-based compensation cost related to restricted stock grants – general and administrative expense	$            5,591	$            5,114	$            5,069
Stock-based compensation cost related to restricted stock grants – capitalized	$            5,162	$            4,107	$            3,767

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Derivatives and Risk Management (Balance Sheet Classification of Derivative Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Total derivative assets	$ 717,343	$ 208,325
Total derivative liabilities	$ 12,513	$ 47,873

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Segment Information

12 Months Ended

Dec. 31, 2011

Segment Information [Abstract]

Segment Information

(13) 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 crude oil. The Midstream Services segment generates revenue through the marketing of both Company and third-party produced natural gas volumes and through gathering fees associated with the transportation of natural gas to market.

Summarized financial information for the Company's reportable segments is shown in the following table. The accounting policies of the segments are the same as those described in Note 1. Management evaluates the performance of its segments based on operating income, defined as operating revenues less operating costs and expenses. 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 and other income (loss), net. The "Other" column includes items not related to the Company's reportable segments including real estate and corporate items.

	Exploration
	And		Midstream
	Production		Services	Other	Total
	(in thousands)
2011
Revenues from external customers	$   2,088,763		$       864,096	$                 47	$    2,952,906
Intersegment revenues	11,725		1,995,423	3,221	2,010,369
Operating income	825,138		247,952	1,711	1,074,801
Other income, net(1)	328		(91)	27	264
Depreciation, depletion and amortization expense	666,125		37,261	1,125	704,511
Interest expense(1)	9,026		15,049	0	24,075
Provision for income taxes(1)	322,714		90,221	286	413,221
Assets	6,547,117	(2)	1,119,861	235,919	7,902,897
Capital investments(3)	1,977,493		160,776	68,905	2,207,174
2010
Revenues from external customers	$   1,871,835		$       738,828	$                 0	$    2,610,663
Intersegment revenues	18,609		1,715,012	984	1,734,605
Operating income	829,462		191,566	200	1,021,228
Other income, net(1)	235		179	13	427
Depreciation, depletion and amortization expense	561,018		28,765	549	590,332
Interest expense(1)	7,888		18,275	0	26,163
Provision for income taxes(1)	323,748		67,834	77	391,659
Assets	4,849,478	(2)	1,016,563	151,422	6,017,463
Capital investments(3)	1,775,518		271,316	73,231	2,120,065
2009
Revenues from external customers	$   1,582,596		$       562,944	$               239	$    2,145,779
Intersegment revenues	10,635		1,040,388	448	1,051,471
Operating income (loss)	(157,725)		122,620	139	(34,966)
Other income, net(1)	1,406		34	9	1,449
Depreciation, depletion and amortization expense	474,014		19,213	431	493,658
Impairment of natural gas and oil properties	907,812		0	0	907,812
Interest expense(1)	15,237		3,401	0	18,638
Provision (benefit) for income taxes(1)	(61,725)		45,303	59	(16,363)
Assets	3,904,739	(2)	767,346	98,165	4,770,250
Capital investments(3)	1,565,450		214,208	29,459	1,809,117

(1) Interest income, interest expense and the provision (benefit) for income taxes by segment are an allocation of corporate amounts as cash equivalents, debt and income tax expense allocated as they are incurred at the corporate level.

(2) Includes capital investments for office, technology, drilling rigs and other ancillary equipment not directly related to natural gas and oil property acquisition, exploration and development activities.

(3) Capital investments include an increase of $4.3 million for 2011, an increase of $14.4 million for 2010 and an increase of $12.2 million for 2009 related to the change in accrued expenditures between years.

Included in intersegment revenues of the Midstream Services segment are $1.7 billion, $1.5 billion and $0.9 billion for 2011, 2010 and 2009, respectively, for marketing of the Company's E&P sales.  Corporate assets include cash and cash equivalents, restricted cash, furniture and fixtures, prepaid debt and other costs. Corporate general and administrative costs, depreciation expense and taxes other than income are allocated to the segments. For 2011 and 2010, capital investments within the E&P segment include $18.7 million and $10.7 million, respectively, related to the Company's activities in Canada. At December 31, 2011, assets include $28.4 million and at December 31, 2010, assets include $11.5 million related to the Company's activities in Canada

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Prepaid Expenses (Tables)

12 Months Ended

Dec. 31, 2011

Prepaid Expenses [Abstract]

Prepaid Expenses Table

	2011	2010
	(in thousands)
Prepaid drilling costs	$            42,775	$              21,997
Prepaid insurance	7,275	7,690
Total	$            50,050	$               29,687

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Derivatives and Risk Management (Narrative) (Details) (USD $)

12 Months Ended

Dec. 31, 2011

Dec. 31, 2010

Accumulated other comprehensive income, net gain related to hedging activities

$ 424,900,000

Deferred income tax liability, accumulated other comprehensive income

276,200,000

Cash Flow Hedge After Tax Net Gain To Be Transfered From Accumulated Other Comprehensive Income To Earnings During Next Twelve Months

303,200,000

Realized gain from settled contracts

320,100,000

301,500,000

Description of Fair Value Hedge Activity

For fair value hedges, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item are recognized in earnings immediately. As of December 31, 2011 and December 31, 2010, the Company had no material fair value hedges.

Year 2012 [Member]

Volume of natural gas production (in Bcf), basis swaps not qualifying for hedge accounting treatment

36.6

Year 2013 [Member]

Volume of natural gas production (in Bcf), basis swaps not qualifying for hedge accounting treatment

30.1

Year 2014 [Member]

Volume of natural gas production (in Bcf), basis swaps not qualifying for hedge accounting treatment

9.1

Fixed Price Swaps [Member]

Derivative Instruments, Gain Reclassified from Accumulated Other Comprehensive Income into Earnings, Effective Portion

256,229,000

230,707,000

Costless Collar [Member]

Derivative Instruments, Gain Reclassified from Accumulated Other Comprehensive Income into Earnings, Effective Portion

$ 65,047,000

$ 70,775,000

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Natural Gas and Oil Producing Activities (Capitalized Costs of Gas and Oil Properties and the Related Accumulated Depreciation, Depletion and Amortization) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010
Natural Gas And Oil Producing Activities Abstract
Proved properties	$ 8,601,818		$ 7,037,746
Unproved properties	942,890	[1]	712,117	[1]
Total capitalized costs	9,544,708		7,749,863
Less: Accumulated depreciation, depletion and amortization	4,092,410		3,444,477
Net capitalized costs	$ 5,452,298		$ 4,305,386

[1] (1) Includes $27.9 and $10.7 million related to our exploration program in New Brunswick, Canada at December 31, 2011 and 2010, respectively.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash Flows From Operating Activities
Net income (loss)	$ 637,769	$ 603,833	$ (35,792)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	707,966	591,943	495,291
Impairment of natural gas and oil properties	0	0	907,812
Deferred income taxes	409,023	379,720	48,606
Unrealized (gain) loss on derivatives	(281)	(4,289)	5,309
Stock-based compensation expense	10,550	9,820	10,177
Other	991	(1,348)	9,625
Change in assets and liabilities:
Accounts receivable	9,659	(88,488)	(8,519)
Inventories	(12,975)	5,099	11,779
Accounts payable	11,490	65,782	(21,739)
Taxes payable	(9,360)	24,551	(6,451)
Interest payable	610	179	(1,082)
Advances from partners	2,377	29,299	(18,197)
Tax benefit for stock-based compensation	(14,626)	0	0
Other assets and liabilities	(13,376)	26,484	(37,443)
Net cash provided by operating activities	1,739,817	1,642,585	1,359,376
Cash Flows From Investing Activities
Capital investments	(2,184,474)	(2,073,174)	(1,780,165)
Proceeds from sale of property and equipment	154,526	350,227	818
Transfers to restricted cash	(85,055)	(356,035)	0
Transfers from restricted cash	85,055	356,035	0
Other	5,158	(2,684)	(1,257)
Net cash used in investing activities	(2,024,790)	(1,725,631)	(1,780,604)
Cash Flows From Financing Activities
Payments on current portion of long-term debt	(1,200)	(1,200)	(61,200)
Payments on revolving long-term debt	(3,445,900)	(2,958,100)	(1,371,700)
Borrowings under revolving long-term debt	3,696,200	3,054,800	1,696,200
Change in bank drafts outstanding	24,637	(11,545)	(30,920)
Revolving credit facility costs	(10,211)	0	0
Proceeds from exercise of common stock options	6,412	3,897	5,755
Tax benefit for stock-based compensation	14,626	0	0
Other	(261)	(1,612)	0
Net cash provided by financing activities	284,303	86,240	238,135
Effect of exchange rate changes on cash	242	(323)	0
Increase (Decrease) in cash and cash equivalents	(428)	2,871	(183,093)
Cash and cash equivalents at beginning of year	16,055	13,184	196,277
Cash and cash equivalents at end of year	$ 15,627	$ 16,055	$ 13,184

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Divestiture

12 Months Ended

Dec. 31, 2011

Divestiture Abstract

Divestiture

(2) DIVESTITURES

In May 2011, we sold certain oil and natural gas leases, wells and gathering equipment in East Texas for approximately $118.1 million. The sale included only the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 9,717 net acres. The net production from the Haynesville and Middle Bossier Shale intervals in this acreage was approximately 7.0 MMcf per day and proved net reserves were approximately 37.1 Bcf when the sale was closed in May 2011.

At closing, the Company deposited $85.0 million of proceeds from this sale with a qualified intermediary to facilitate potential like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code. The remaining funds were classified as restricted cash in the consolidated balance sheet and, unless utilized for one or more like-kind exchange transactions, were restricted in their use until November 2011. For the year ended December 31, 2011, the Company utilized $82.1 million of these restricted funds for like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code.

In June 2010, we sold certain oil and natural gas leases, wells and gathering equipment in East Texas for approximately $357.8 million. The sale included only the producing rights to the Haynesville and Middle Bossier Shale intervals in approximately 20,063 net acres. The net production from the Haynesville and Middle Bossier Shale intervals in this acreage was approximately 13.5 MMcf per day and proved net reserves were approximately 55.4 Bcf when the sale was closed in June 2010.

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Income Taxes (Provision (Benefit) for Income Taxes) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Income Taxes
Federal Current	$ 3,378		$ 10,421		$ (65,309)
State Current	820		1,518		340
Total Current	4,198		11,939		(64,969)
Federal Deferred	345,922		319,279		48,308
State Deferred	60,941		59,982		298
Foreign Deferred	2,160		459		0
Deferred	409,023		379,720		48,606
Provision (benefit) for income taxes	$ 413,221	[1]	$ 391,659	[1]	$ (16,363)

[1] (1) Interest income, interest expense and the provision (benefit) for income taxes by segment are an allocation of corporate amounts as cash equivalents, debt and income tax expense allocated as they are incurred at the corporate level.

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Retirement and Employee Benefit Plans (Measurement Purposes Following Trend Rates were Assumed) (Details)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Retirement and Employee Benefit Plans [Abstract]
Health care cost trend assumed for next year	9.00%	9.00%
Rate to which the cost trend is assumed to decline	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2031	2030

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Natural Gas and Oil Producing Activities (Tables)

12 Months Ended

Dec. 31, 2011

Natural Gas And Oil Producing Activities Abstract

Capitalized Costs of Gas and Oil Properties and the Related Accumulated Depreciation, Depletion and Amortization

	2011		2010
	(in thousands)
Proved properties	$    8,601,818		$    7,037,746
Unproved properties	942,890	(1)	712,117	(1)
Total capitalized costs	9,544,708		7,749,863
Less:  Accumulated depreciation, depletion and amortization	4,092,410		3,444,477
Net capitalized costs	$    5,452,298		$    4,305,386

Composition of Net Unevaluated Costs Excluded from Amortization

	2011	2010	2009	Prior	Total
	(in thousands)
Property acquisition costs	$     254,622	$     143,165	$       44,513	$       110,767	$    553,067
Exploration and development costs	190,240	20,844	29,527	67,335	307,946
Capitalized interest	14,651	12,901	10,261	44,064	81,877
	$     459,513	$     176,910	$     84,301	$    222,166	$    942,890

Capitalized Costs Incurred in Natural Gas and Oil Property Acquisition, Exploration and Development Activities

	2011		2010		2009
	(in thousands, except per Mcfe amounts)
Proved property acquisition costs	$            17		$                0		$          4,372
Unproved property acquisition costs	262,886	(1)	229,909	(1)	115,217
Exploration costs	63,419	(2)	27,062	(2)	52,178
Development costs	1,633,784		1,524,453		1,358,109
Capitalized costs incurred	1,960,106		1,781,424		1,529,876
Full cost pool amortization per Mcfe	$            1.30		$            1.34		$            1.51

Results of Operations from Natural Gas and Oil Producing Activities

	2011	2010	2009
	(in thousands)
Sales	$ 2,100,488	$ 1,890,444	$ 1,593,231
Production (lifting) costs	(469,153)	(376,939)	(259,588)
Depreciation, depletion and amortization	(666,107)	(561,003)	(474,014)
Impairment of natural gas and oil properties	0	0	(907,812)
	965,228	952,502	(48,183)
Provision (benefit) for income taxes	376,049	371,281	(15,650)
Results of operations	$   589,179	$    581,221	$    (32,533)

Changes in Proved Natural Gas and Oil Reserves

	2011		2010		2009
	Natural		Natural		Natural
	Gas	Oil	Gas	Oil	Gas	Oil
	(MMcf)	(MBbls)	(MMcf)	(MBbls)	(MMcf)	(MBbls)
Proved reserves, beginning of year	4,929,980	1,219	3,650,303	1,059	2,175,528	1,507
Revisions of previous estimates	34,505	(125)	309,292	50	94,930	(346)
Extensions, discoveries and other additions	1,459,428	2	1,429,439	281	1,683,264	22
Production	(499,433)	(97)	(403,636)	(171)	(299,698)	(124)
Acquisition of reserves in place	13	0	0	0	1,795	0
Disposition of reserves in place	(37,286)	(3)	(55,418)	0	(5,516)	0
Proved reserves, end of year	5,887,207	996	4,929,980	1,219	3,650,303	1,059
Proved developed reserves:
Beginning of year	2,687,238	1,173	1,972,767	1,028	1,336,370	1,352
End of year	3,254,018	983	2,687,238	1,173	1,972,767	1,028
Proved undeveloped reserves:
Beginning of year	2,242,742	46	1,677,536	31	839,158	155
End of year	2,633,189	13	2,242,742	46	1,677,536	31

Standardized Measures of Discounted Future Net Cash Flows Relating to Proved Natural Gas and Oil Reserves

	2011	2010	2009
	(in thousands)
Future cash inflows	$ 22,012,205	$ 19,620,254	$ 12,533,868
Future production costs	(8,080,207)	(6,826,915)	(4,488,884)
Future development costs	(3,425,185)	(3,025,433)	(2,367,206)
Future income tax expense	(3,366,175)	(3,143,571)	(1,569,242)
Future net cash flows	7,140,638	6,624,335	4,108,536
10% annual discount for estimated timing of cash flows	(3,689,838)	(3,610,585)	(2,306,718)
Standardized measure of discounted future net cash flows	$ 3,450,800	$  3,013,750	$  1,801,818

Analysis of Changes in the Standardized Measure

	2011	2010	2009
	(in thousands)
Standardized measure, beginning of year	$  3,013,750	$  1,801,818	$  2,109,262
Sales and transfers of natural gas and oil produced, net of production costs	(1,632,156)	(1,516,571)	(1,330,256)
Net changes in prices and production costs	(381,131)	706,062	(1,321,404)
Extensions, discoveries, and other additions, net of future production and development costs	1,163,992	1,205,464	976,449
Acquisition of reserves in place	30	0	1,878
Sales of reserves in place	(11,761)	(6,269)	(4,430)
Revisions of previous quantity estimates	34,221	324,284	88,261
Accretion of discount	426,245	230,355	302,439
Net change in income taxes	(103,643)	(746,971)	413,399
Changes in estimated future development costs	70,492	(10,558)	204,005
Previously estimated development costs incurred during the year	564,894	353,560	218,625
Changes in production rates (timing) and other	305,867	672,576	143,590
Standardized measure, end of year	$  3,450,800	$  3,013,750	$  1,801,818

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Stock-Based Compensation (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Stock options, outstanding at January 1, number of options	4,769,122	5,649,233	7,396,537
Stock options, granted, number of options	853,478	446,895	412,515
Stock options, exercised, number of options	(850,659)	(1,293,046)	(2,152,819)
Stock options, forfeited or expired, number of options	(30,209)	(33,960)	(7,000)
Stock options, outstanding at December 31, number of options	4,741,732	4,769,122	5,649,233
Stock options, exercisable at December 31	3,482,068
Stock options, outstanding at January 1, weighted average exercise price	$ 16.13	$ 11.59	$ 7.44
Stock options, granted, weighted average exercise price	$ 36.64	$ 37.05	$ 39.83
Stock options, exercised, weighted average exercise price	$ 7.54	$ 3.01	$ 2.67
Stock options, forfeited or expired, weighted average exercise price	$ 35.46	$ 35.26	$ 31.21
Stock options, outstanding at December 31, weighted average exercise price	$ 21.24	$ 16.13	$ 11.59
Stock options exercisable at December 31, weighted average exercise price	$ 15.53
Restricted Stock, Unvested shares at January 1, Number of Shares	834,058	794,529	843,430
Restricted Stock, Granted, Number of Shares	532,754	390,415	319,950
Restricted Stock, Vested, Number of Shares	(294,358)	(319,894)	(359,247)
Restricted Stock, Forfeited, Number of Shares	(52,717)	(30,992)	(9,604)
Restricted Stock, Unvested shares at December 31, Number of Shares	1,019,737	834,058	794,529
Restricted Stock, Unvested shares at December 31, Weighted Average Grant Date Fair Value	$ 36.24	$ 33.70	$ 27.66
Stock Options, Granted, Weighted Average Grant Date Fair Value	$ 36.41	$ 36.46	$ 39.03
Restricted Stock, Vested, Weighted Average Grant Date Fair Value	$ 34.90	$ 30.45	$ 24.37
Restricted Stock, Forfeited, Weighted Average Grant Date Fair Value	$ 36.45	$ 33.54	$ 29.47
Restricted Stock, Unvested shares at January 1, Weighted Average Grant Date Fair Value	$ 36.71	$ 36.24	$ 33.70
Fair value of grants	$ 19,400,000	$ 14,200,000	$ 12,500,000
Total fair value of shares vested	10,900,000	9,700,000	14,900,000
2004 Plan [Member]
Maximum shares	16,800,000
2002 Plan [Member]
Maximum shares	300,000
2000 Plan [Member]
Maximum shares	1,250,000
1.43 - 3.10 [Member]
Stock options, outstanding at December 31, number of options	1,727,398
Stock options, exercisable at December 31	1,727,398
Stock options exercisable at December 31, weighted average exercise price	$ 2.10
30.01 - 36.00 [Member]
Stock options, outstanding at December 31, number of options	606,133
Stock options, exercisable at December 31	490,190
Stock options exercisable at December 31, weighted average exercise price	$ 31.11
36.01 - 40.00 [Member]
Stock options, outstanding at December 31, number of options	1,130,705
Stock options, exercisable at December 31	153,086
Stock options exercisable at December 31, weighted average exercise price	$ 36.86
40.01 - 51.47 [Member]
Stock options, outstanding at December 31, number of options	414,846
Stock options, exercisable at December 31	254,850
Stock options exercisable at December 31, weighted average exercise price	$ 41.50
3.11 - 30.00 [Member]
Stock options, outstanding at December 31, number of options	862,650
Stock options, exercisable at December 31	856,544
Stock options exercisable at December 31, weighted average exercise price	$ 22.14
Stock Options [Member]
Stock-based compensation costs - general and administrative expense	4,959,000	4,706,000	5,108,000
Stock-based compensation costs - capitalized	3,365,000	2,679,000	2,124,000
Stock Options, Granted, Weighted Average Grant Date Fair Value	$ 18.17	$ 19.40	$ 21.35
Deferred tax benefit (liability) related to stock options	1,700,000	1,700,000	1,400,000
Unrecognized compensation costs related to stock options not yet vested	20,700,000
Weighted average period over which cost is recognized, years	2.1
Total intrinsic value of options exercised	27,000,000	41,400,000	87,600,000
Restricted Stock [Member]
Stock-based compensation costs - general and administrative expense	5,591,000	5,114,000	5,069,000
Stock-based compensation costs - capitalized	5,162,000	4,107,000	3,767,000
Deferred tax benefit (liability) related to stock options	2,100,000	1,400,000	700,000
Unrecognized compensation costs related to stock options not yet vested	$ 34,000,000
Weighted average period over which cost is recognized, years	3.2

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Basis of Presentation and New Accounting Standards (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Current assets inventory, underground storage	$ 7,800,000	$ 10,000,000
Current assets inventory, tubulars & other equipment	38,400,000	25,100,000
Other assets non-current inventory, gathering systems pipe	19,500,000	20,600,000
Natural gas storage revenue	900,000	2,500,000	3,400,000
Outstanding checks included in accounts payable	47,700,000	23,100,000
Cash flow hedges impact on ceiling value	262,500,000
Ceiling test impairment, amount net of tax			558,300,000
Interest Paid, Net	19,159,000	24,049,000	16,453,000
Income Taxes Paid, Net	4,198,000	14,368,000	(41,469,000)
Capital Expenditures Incurred but Not yet Paid	30,389,000	46,588,000	28,951,000
Average exercise price of outstanding options	$ 11.78	$ 9.42	$ 8.33
Treasury stock, shares	98,889	156,636
Overproduction [Member]
Gas imbalance volume amount in Bcf	6.1	3.9
Gas imbalance asset (liability)	22,500,000	13,300,000
Underproduction [Member]
Gas imbalance volume amount in Bcf	6.4	3.7
Gas imbalance asset (liability)	22,900,000	12,800,000
Henry Hub Natural Gas [Member]
Full cost ceiling test, price per MMBtu	4.12	4.38	3.87
West Texas Intermediate Oil [Member]
Full cost ceiling test, price per barrel	$ 92.71	$ 75.96	$ 57.65
Stock Options [Member]
Number of common shares, issued upon assumed exercise of outstanding stock options	3,577,104	4,753,530
Antidilutive securities excluded from computation of earnings per share, shares	881,254	548,160	6,683,085
Restricted Stock [Member]
Number of common shares, issued upon assumed exercise of outstanding stock options	241,044	700,512
Antidilutive securities excluded from computation of earnings per share, shares	135,352	39,600	836,861

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

(12) STOCK-BASED COMPENSATION

The Southwestern Energy Company 2004 Stock Incentive Plan (2004 Plan) was adopted in February 2004 and approved by stockholders in May 2004. The 2004 Plan provides for the compensation of officers, key employees and eligible non-employee directors of the Company and its subsidiaries. The 2004 Plan replaced the Southwestern Energy Company 2000 Stock Incentive Plan (2000 Plan) and the Southwestern Energy Company 2002 Employee Stock Incentive Plan (2002 Plan) but did not affect prior awards under those plans which remained valid and some of which are still outstanding. The awards under the prior plans have been adjusted for stock splits as permitted under such plans.

The 2004 Plan provides for grants of options, stock appreciation rights, and shares of restricted stock and restricted stock units to employees, officers and directors that in the aggregate do not exceed 16,800,000 shares. The types of incentives that may be awarded are comprehensive and are intended to enable the Company's board of directors to structure the most appropriate incentives and to address changes in income tax laws which may be enacted over the term of the 2004 Plan.

As initially adopted, the 2000 Plan provided for the grant of options, stock appreciation rights, shares of phantom stock, and shares of restricted stock to employees, officers and directors that in the aggregate did not exceed 1,250,000 shares of common stock. As initially adopted, the 2002 Plan provided for grants of options, stock appreciation rights, shares of phantom stock and shares of restricted stock that in the aggregate did not exceed 300,000 shares to employees who are not officers or directors of the Company under provisions of Section 16 of the Securities Exchange Act of 1934, as amended.

The Company may utilize treasury shares, if available, or authorized but unissued shares when a stock option is exercised or when restricted stock is granted.

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. All options are issued at fair market value at the date of grant and expire seven years from the date of grant for awards under the 2004 Plan and ten years from the date of grant for awards under all other plans. Generally, stock options granted to employees and directors vest ratably over three years from the grant date. The Company issues shares of restricted stock to employees and directors which generally vest over four years. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the individual grants with the exception of awards granted to participants who have reached retirement age or will reach retirement age during the vesting period. Restricted stock and stock options granted to participants on or after December 8, 2005 immediately vest upon death, disability or retirement (subject to a minimum of five years of service).

Stock Options

The Company recorded the following compensation costs related to stock options for the years ended December 31, 2011, 2010 and 2009:

	2011	2010	2009
	(in thousands)
Stock-based compensation cost related to stock options – general and administrative expense	$            4,959	$            4,706	$            5,108
Stock-based compensation cost related to stock options – capitalized	$            3,365	$            2,679	$            2,124

The Company also recorded a deferred tax benefit of $1.7 million related to stock options in 2011, compared to deferred tax benefits of $1.7 million in 2010 and $1.4 million in 2009. A total of $20.7 million of unrecognized compensation cost related to the Company's unvested stock option and restricted stock grants. This cost is expected to be recognized over a weighted-average period of 2.1 years.

The fair value of stock options is estimated on the date of the grant using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table.  Expected volatility is based on historical volatility of the Company's common stock and other factors.  The Company uses historical data on exercise of stock options, post vesting forfeitures and other factors to estimate the expected term of the stock-based payments granted. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.

Assumptions	2011	2010	2009
Risk-free interest rate	0.9%	2.0%	2.2%
Expected dividend yield	0	0	0
Expected volatility	58.1%	60.1%	61.6%
Expected term	5 years	5 years	5 years

The following tables summarize stock option activity for the years 2011, 2010 and 2009 and provide information for options outstanding at December 31 of such years:

	2011		2010		2009
		Weighted		Weighted		Weighted
		Average		Average		Average
	Number	Exercise	Number	Exercise	Number	Exercise
	of Shares	Price	of Shares	Price	of Shares	Price
Options outstanding at January 1	4,769,122	$     16.13	5,649,233	$     11.59	7,396,537	$       7.44
Granted	853,478	36.64	446,895	37.05	412,515	39.83
Exercised	(850,659)	7.54	(1,293,046)	3.01	(2,152,819)	2.67
Forfeited or expired	(30,209)	35.46	(33,960)	35.26	(7,000)	31.21
Options outstanding at December 31	4,741,732	$     21.24	4,769,122	$     16.13	5,649,233	$     11.59

	Options Outstanding				Options Exercisable
			Weighted				Weighted
			Average				Average
		Weighted	Remaining	Aggregate		Weighted	Remaining	Aggregate
	Options	Average	Contractual	Intrinsic	Options	Average	Contractual	Intrinsic
Range of	Outstanding at	Exercise	Life	Value	Exercisable at	Exercise	Life	Value
Exercise Prices	December 31, 2011	Price	(Years)	(in thousands)	December 31, 2011	Price	(Years)	(in thousands)
$1.43 - $3.10	1,727,398	$    2.10	1.5		1,727,398	$    2.10	1.5
$3.11 - $30.00	862,650	22.19	2.1		856,544	22.14	2.1
$30.01 - $36.00	606,133	31.54	4.4		490,190	31.11	4.0
$36.01 - $40.00	1,130,705	36.77	6.5		153,086	36.86	5.5
$40.01 - $51.47	414,846	41.60	5.0		254,850	41.50	4.8
	4,741,732	$  21.24	3.5	$  60,505	3,482,068	$  15.53	2.4	$ 60,484

The weighted-average grant-date fair value of options granted during the years 2011, 2010 and 2009 was $18.17, $19.40 and $21.35, respectively. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $27.0 million, $41.4 million and $87.6 million, respectively.

Restricted Stock

The Company recorded the following compensation costs related to restricted stock grants for the years ended December 31, 2011, 2010 and 2009:

	2011	2010	2009
	(in thousands)
Stock-based compensation cost related to restricted stock grants – general and administrative expense	$            5,591	$            5,114	$            5,069
Stock-based compensation cost related to restricted stock grants – capitalized	$            5,162	$            4,107	$            3,767

The Company also recorded a deferred tax liability of $2.1 million related to restricted stock for the year ended December 31, 2011, compared to deferred tax liabilities of $1.4 million for 2010 and $0.7 million for 2009. As of December 31, 2011, there was $34.0 million of total unrecognized compensation cost related to unvested shares of restricted stock that is expected to be recognized over a weighted-average period of 3.2 years.

The following table summarizes the restricted stock activity for the years 2011, 2010 and 2009 and provides information for restricted stock outstanding at December 31 of such years.

	2011		2010		2009
		Weighted		Weighted		Weighted
		Average		Average		Average
	Number	Grant Date	Number	Grant Date	Number	Grant Date
	of Shares	Fair Value	of Shares	Fair Value	of Shares	Fair Value
Unvested shares at January 1	834,058	$     36.24	794,529	$     33.70	843,430	$     27.66
Granted	532,754	36.41	390,415	36.46	319,950	39.03
Vested	(294,358)	34.90	(319,894)	30.45	(359,247)	24.37
Forfeited	(52,717)	36.45	(30,992)	33.54	(9,604)	29.47
Unvested shares at December 31	1,019,737	$     36.71	834,058	$     36.24	794,529	$     33.70

The fair values of the grants were $19.4 million for 2011, $14.2 million for 2010 and $12.5 million for 2009. The total fair value of shares vested were $10.9 million for 2011, $9.7 million for 2010 and $14.9 million for 2009.

CORRESP

Southwestern Energy Company
2350 North Sam Houston Parkway East
Suite 125
Houston, TX 77032

February 27, 2012

Securities and Exchange Commission
ATTN: Filing Desk, Stop 1-4
450 Fifth Street, N. W.
Washington, DC 20549-1004

Ladies and Gentlemen:

Pursuant to regulations of the Securities and Exchange Commission, submitted herewith for filing on behalf of Southwestern Energy Company is the Annual Report on Form 10-K for the year ended December 31, 2011.

This filing is being effected by direct transmission to the Commission's EDGAR System.

Very truly yours,

  /s/ ROBERT C. OWEN                     
Controller and Chief Accounting Officer