Southwestern Energy Announces Second Quarter 2009 Financial and Operating Results

Southwestern Energy Announces Second Quarter 2009 Financial and Operating
Results

HOUSTON, July 30 /PRNewswire-FirstCall/ -- Southwestern Energy Company (NYSE:
SWN) today announced its financial and operating results for the second
quarter of 2009. Highlights include:

-- Natural gas and crude oil production of 74.3 Bcfe, up 65% over the
same
period in 2008
-- Net cash provided by operating activities before changes in operating
assets and liabilities of $325.3 million (a non-GAAP measure
reconciled
below), up 13% from the same period in 2008

-- Net earnings of $121.1 million, compared to $136.6 million in the same
period in 2008

For the second quarter of 2009, Southwestern reported net income of $121.1
million, or $0.35 per diluted share, compared to $136.6 million, or $0.39 per
diluted share, for the same period in 2008. Net cash provided by operating
activities before changes in operating assets and liabilities (a non-GAAP
measure reconciled below) was $325.3 million in the second quarter of 2009, up
from $288.2 million for the same period in 2008.

"We continue to make significant progress in the development of our
Fayetteville Shale play every quarter, and the second quarter was no
exception," remarked Harold M. Korell, Executive Chairman of Southwestern
Energy. "Our gross operated production from the Fayetteville Shale reached a
significant milestone of 1 Bcf per day in July, compared to approximately 500
MMcf per day this time a year ago. The productivity of our wells also
continues to improve as we learn more. While current gas prices remain low, we
believe lower industry drilling activity will result in higher prices over the
next 18 months. With our focus on value creation and a world-class resource to
develop in the Fayetteville Shale, we are well-positioned not only to weather
the current low commodity price environment with our strong balance sheet and
financial flexibility, but also to benefit greatly when prices return to more
normalized levels."

For the first six months of 2009, Southwestern reported a net loss of $311.7
million, or $0.91 per diluted share, which included a first quarter $907.8
million non-cash ceiling test impairment ($558.3 million net of taxes) of the
company's natural gas and oil properties resulting from lower natural gas
prices. Excluding the non-cash impairment, Southwestern's net income for the
first six months of 2009 was $246.6 million (a non-GAAP measure; see
reconciliation below), or $0.71 per diluted share, compared to net income of
$245.6 million, or $0.71 per diluted share, in the same period in 2008.

Net cash provided by operating activities before changes in operating assets
and liabilities (a non-GAAP measure; see reconciliation below), was $697.9
million for the first six months of 2009, up 22% from $571.9 million for the
same period in 2008. Excluding the non-cash impairment, the company's
financial results have been impacted primarily by the significant growth in
production volumes during the first six months of 2009, partially offset by
lower realized natural gas prices.

Second Quarter 2009 Financial Results

E&P Segment - Operating income from the company's E&P segment was $174.4
million for the second quarter of 2009, compared to $215.1 million for the
same period in 2008. The decrease was primarily due to a 39% decrease in
realized natural gas prices and a 22% increase in operating costs and
expenses, which was partially offset by a 65% increase in production volumes.

Gas and oil production totaled 74.3 Bcfe in the second quarter of 2009, up
from 45.1 Bcfe in the second quarter of 2008, and included 60.6 Bcf from the
company's Fayetteville Shale play, up from 29.6 Bcf in the second quarter of
2008. As a result of recent inspections, repairs and maintenance on the
Fayetteville Lateral of the Texas Gas Transmission Pipeline (Boardwalk
Pipeline), the company has experienced curtailments that have impacted its
ability to transport its production from the Fayetteville Shale. Beginning in
April 2009, Texas Gas reduced the capacity on, or shut down, the Fayetteville
Lateral on several occasions due to various activities, including maintenance
and pipeline inspection. These activities, as well as similar repairs to the
Greenville Lateral, are expected to continue, resulting in future
curtailments. Texas Gas has estimated that it will begin repairs and
maintenance on the pipeline in September and that the repairs will be
completed in one to five months.

Currently, the company's transportation capacity for its Fayetteville Shale
production is sufficient for its wells at a gross operated rate of
approximately 1,050 MMcf per day. Southwestern's net share of its gross
operated capacity, together with its share of production which is operated by
other companies, is approximately 750 MMcf per day. Southwestern estimates
that its total gross operated production will be curtailed to approximately
650 MMcf per day, or approximately 450 MMcf per day net, once the repairs to
the Fayetteville Lateral Phase 1 facilities begin. In anticipation of these
continued pipeline curtailments, Southwestern has revised its previous gas and
oil production guidance range for 2009 from 289 to 292 Bcfe to 278 to 288
Bcfe, or approximately 45% over 2008 levels (using midpoints). Of the total
2009 targeted annual production, approximately 227 to 236 Bcf is expected to
come from the Fayetteville Shale. This revised production guidance assumes
curtailment of portions of the Fayetteville Lateral Phase 1 facilities for 45
to 60 days starting in September and total curtailed volumes for the remainder
of the year of approximately 15 Bcf net to Southwestern. Southwestern's
production guidance for the remainder of 2009 is shown below:

1st 2nd 3rd 4th Full-Year
Quarter Quarter Quarter Quarter 2009
Actual Actual Estimate Estimate Estimate
------ ------ -------- -------- --------
Previous Guidance (Bcfe) 60 - 61 70 - 71 75 - 76 80 - 81 289 - 292

Revised Guidance (Bcfe) 63.9 74.3 66 - 68 74 - 82 278 - 288

Including the effect of hedges, Southwestern's average realized gas price in
the second quarter of 2009 was $5.01 per Mcf, down from $8.17 per Mcf in the
second quarter of 2008. The company's commodity hedging activities increased
its average gas price by $2.11 per Mcf during the second quarter of 2009,
compared to a decrease of $1.83 per Mcf during the same period in 2008.

Disregarding the impact of commodity price hedges, the company's average price
received for its gas production during the second quarter of 2009 was
approximately $0.60 per Mcf lower than average NYMEX spot prices, compared to
approximately $0.92 per Mcf lower during the second quarter of 2008. The
company believes that average basis differentials going forward will generally
approximate those experienced in the second quarter of 2009, but will be
volatile due to the Boardwalk Pipeline repairs discussed above. As of July 30,
2009, the company had protected approximately 50 Bcf of its third quarter 2009
expected gas production from the potential of widening basis differentials
through hedging activities and sales arrangements at an average basis
differential to NYMEX gas prices of approximately $0.35 per Mcf, excluding
transportation charges and fuel charges. As of that same date for the fourth
quarter of 2009, the company had protected approximately 30 Bcf at an average
basis differential to NYMEX gas prices of approximately $0.35 per Mcf,
excluding transportation and fuel charges. The company typically sells its
natural gas at a discount to NYMEX spot prices due to locational basis
differentials, transportation charges and fuel charges.

Lease operating expenses per unit of production for the company's E&P segment
were $0.73 per Mcfe in the second quarter of 2009, down from $0.95 per Mcfe in
the second quarter of 2008. The decrease primarily resulted from the impact
that lower natural gas prices had on the cost of compressor fuel in the second
quarter of 2009.

General and administrative expenses per unit of production were $0.34 per Mcfe
in the second quarter of 2009, down from $0.41 per Mcfe in the second quarter
of 2008. The decrease was primarily due to the effects of the company's
increased production volumes which more than offset increased compensation and
related costs primarily associated with the expansion of the company's E&P
operations due to the Fayetteville Shale play.

Taxes other than income taxes per unit of production were $0.08 per Mcfe in
the second quarter of 2009, compared to $0.16 per Mcfe in the second quarter
of 2008, primarily due to changes in severance and ad valorem taxes that
result from the mix of the company's production volumes combined with lower
commodity prices.

The company's full cost pool amortization rate decreased to $1.46 per Mcfe in
the second quarter of 2009, compared to $2.01 per Mcfe in the second quarter
of 2008. The decline in the average amortization rate was primarily the result
of the $907.8 million non-cash ceiling test impairment recorded in the first
quarter of 2009. The amortization rate is impacted by 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, impairments
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. The future full cost pool amortization rate cannot be predicted
with accuracy due to the variability of each of the factors discussed above,
as well as other factors.

Midstream Services - Operating income for the company's midstream services
segment, which is comprised of natural gas gathering and marketing activities,
was $27.8 million for the three months ended June 30, 2009, up from $15.0
million in the same period in 2008. The increase in operating income was
primarily due to the increase in gathering revenues from the company's
Fayetteville Shale play, partially offset by increased operating costs and
expenses. At June 30, 2009, the company's midstream segment was gathering
approximately 1,060 MMcf per day through 960 miles of gathering lines in the
Fayetteville Shale play area, up from approximately 600 MMcf per day a year
ago. Gathering volumes, revenues and expenses for this segment are expected to
continue to grow as reserves related to the company's Fayetteville Shale play
are developed and production increases.

First Six Months of 2009 Financial Results

E&P Segment - Excluding the non-cash ceiling test impairment, operating income
from the company's E&P segment was $354.4 million for the six months ended
June 30, 2009 (a non-GAAP measure; see reconciliation below), compared to
$380.8 million for the same period in 2008. The decrease was primarily due to
lower realized natural gas prices and increased operating costs and expenses
which were partially offset by higher production.

Gas and oil production was 138.2 Bcfe in the first six months of 2009,
compared to 84.1 Bcfe in the first six months of 2008, and included 110.8 Bcf
from the company's Fayetteville Shale play, up from 53.2 Bcfe in the first six
months of 2008.

Southwestern's average realized gas price was $5.44 per Mcf, including the
effect of hedges, in the first six months of 2009 compared to $7.95 per Mcf in
the first six months of 2008. The company's hedging activities increased the
average gas price realized during the first six months of 2009 by $2.12 per
Mcf, compared to a decrease of $0.87 per Mcf during the first six months of
2008. Disregarding the impact of hedges, the average price received for the
company's gas production during the first six months of 2009 was approximately
$0.87 per Mcf lower than average NYMEX spot prices, compared to approximately
$0.66 per Mcf lower than NYMEX spot prices during the first six months of
2008.

Lease operating expenses for the company's E&P segment were $0.76 per Mcfe in
the first six months of 2009, down from $0.87 per Mcfe in the first six months
of 2008. The decrease was primarily the result of the impact that lower
natural gas prices had on the cost of compressor fuel in the first six months
of 2009.

General and administrative expenses were $0.32 per Mcfe in the first six
months of 2009, compared to $0.42 per Mcfe in the first six months of 2008.
The decrease was primarily due to the effects of the company's increased
production volumes which more than offset increased compensation and related
costs primarily associated with the expansion of the company's E&P operations
due to the Fayetteville Shale play.

Taxes other than income taxes were $0.10 per Mcfe during the first six months
of 2009, compared to $0.16 per Mcfe during the first six months of 2008,
primarily due to the change in the mix of the company's production volumes
combined with lower commodity prices.

The company's full cost pool amortization rate decreased to $1.63 per Mcfe in
the first six months of 2009, compared to $2.15 per Mcfe in the first six
months of 2008, primarily due to the $907.8 million non-cash ceiling test
impairment recorded in the first quarter of 2009 and the sale of natural gas
and oil properties in 2008, as the proceeds were credited to the full cost
pool.

Midstream Services - Operating income for the company's midstream activities
was $55.2 million in the first six months of 2009, compared to $25.2 million
in the first six months of 2008. The increase in operating income was
primarily due to increased gathering revenues and an increase in the margin
from gas marketing activities related to the Fayetteville Shale play,
partially offset by increased operating costs and expenses.

Capital Investments - For the first six months of 2009, Southwestern invested
a total of $959.4 million, compared to $825.4 million during the first six
months of 2008, which included $852.5 million invested in its E&P business and
$102.5 million invested in its Midstream Services activities. Of the $852.5
million invested in its E&P business, approximately $700.7 million was
invested in its Fayetteville Shale play, $74.0 million in East Texas, $32.4
million in its conventional Arkoma Basin program and $31.8 million in New
Ventures. The company expects that its total capital investments for the full
year of 2009 to be approximately $1.8 billion.

E&P Operations Review

Fayetteville Shale Play - For the first six months of 2009, Southwestern
placed a total of 231 operated wells on production in the Fayetteville Shale
play, all of which were horizontal wells fracture stimulated using slickwater.

At June 30, 2009, the company's gross production rate from the Fayetteville
Shale play was approximately 990 MMcf per day, up from approximately 500 MMcf
per day a year ago. The graph below provides gross production data from the
company's operated wells in the Fayetteville Shale play area through June 30,
2009.

(Photo: http://www.newscom.com/cgi-bin/prnh/20090730/DA54480-a)

During the second quarter of 2009, the company's horizontal wells had an
average completed well cost of $2.9 million per well, average horizontal
lateral length of 4,123 feet and average time to drill to total depth of 11
days from re-entry to re-entry. This compares to an average completed well
cost of $3.1 million per well, average horizontal lateral length of 3,874 feet
and average time to drill to total depth of 12 days from re-entry to re-entry
in the first quarter of 2009. The company currently has 17 drilling rigs
running in its Fayetteville Shale play area, 13 that are capable of drilling
horizontal wells and 4 smaller rigs that are used to drill the vertical
portion of the wells. The company currently expects its gross well count in
the play during 2009 to be approximately 575 wells (75% operated).

Since 2007, the continuous improvement of the company's completion practices
have resulted in quarter-over-quarter improvements in average initial
production rates of operated wells placed on production. Results from the
company's drilling activities from 2007 through 2009, by quarter, are shown
below.

Completion
Wells Average 30th-Day 60th-Day Average Method
Placed on IP Rate Avg Rate Avg Rate Lateral SW/XL/
Time Frame Production (Mcf/d) (# of wells) (# of wells) Length Hy-RHy

1st Qtr 2007 58 1,261 1,066(58) 958(58) 2,104 11/37/10
2nd Qtr 2007 46 1,497 1,254(46) 1,034(46) 2,512 24/12/10
3rd Qtr 2007 74 1,769 1,510(72) 1,350(71) 2,622 69/4/1
4th Qtr 2007 77 2,027 1,690(77) 1,499(76) 3,193 68/1/8
1st Qtr 2008 75 2,343 2,147(75) 1,943(74) 3,301 71/1/3
2nd Qtr 2008 83 2,541 2,155(83) 1,886(83) 3,562 83/0/0
3rd Qtr 2008 97 2,882 2,560(97) 2,349(97) 3,736 97/0/0
4th Qtr 2008(1) 74 3,350(1) 2,722(74) 2,401(73) 3,850 74/0/0
1st Qtr 2009(1) 120 2,992(1) 2,537(120) 2,310(119) 3,874 120/0/0
2nd Qtr 2009 111 3,611 2,952(82) 2,694(56) 4,123 111/0/0

Note: Results as of June 30, 2009.
SW - Slickwater fluids
XL - Crosslinked gel fluids
Hy-RHy - Hybrid or Reverse Hybrid method (combination
slickwater/crosslinked gel fluid system)

(1) The significant increase in the average initial production rate for
the fourth quarter of 2008 and the subsequent decrease for the first
quarter of 2009 primarily reflected the impact of the delay in the
Boardwalk Pipeline. Wells that were placed on production in January
and February of 2009 had average initial production rates of 2,806 Mcf
per day and 2,749 Mcf per day, respectively, while wells placed on
production during March 2009 had average initial production rates of
3,353 Mcf per day.

The graph below provides normalized average daily production data through June
30, 2009, for the company's horizontal wells using slickwater and crosslinked
gel fluids. The "dark blue curve" is for horizontal wells fracture stimulated
with either slickwater or crosslinked gel fluid. The "red curve" indicates
results for the company's wells with lateral lengths greater than 3,000 feet,
while the "purple curve" indicates results for the company's wells with
lateral lengths greater than 4,000 feet. The normalized production curves are
intended to provide a qualitative indication of the company's Fayetteville
Shale wells' performance and should not be used to estimate an individual
well's estimated ultimate recovery. The 2.0, 2.5 and 3.0 Bcf typecurves are
shown solely for reference purposes and are not intended to be projections of
the performance of the company's wells.

(Photo: http://www.newscom.com/cgi-bin/prnh/20090730/DA54480-b)

At June 30, 2009, Southwestern held approximately 879,000 net acres in the
play area (including 125,372 net acres in the traditional Fairway portion of
the Arkoma Basin).

East Texas - In the second quarter of 2008, Southwestern signed a 50/50 joint
venture agreement with a private company targeting the Haynesville/Bossier
Shale intervals in Shelby and San Augustine Counties, Texas. The first
horizontal well, the Red River 877 #1 located in Shelby County, reached total
depth in the fourth quarter of 2008, was production tested at 7.2 MMcf per day
in the first quarter of 2009 and is currently producing approximately 1.8 MMcf
per day. The second horizontal well, the Red River 164 #1, was production
tested at 13.4 MMcf per day in the second quarter of 2009 and is currently
producing approximately 7.8 MMcf per day. The company has completed drilling a
third well, the Red River 619 #1 well located in San Augustine County, and
recently spud its fourth well, the Burrows Gas Unit #1-H. Pending further
results from these wells, the company may invest more capital in the
Haynesville/Bossier Shale play than previously planned. In total, Southwestern
has approximately 32,800 net acres it believes is prospective for the
Haynesville/Bossier Shale.

Southwestern participated in drilling 23 wells in East Texas during the first
six months of 2009, 21 of which were James Lime horizontal wells. The company
currently has 28 operated James Lime horizontal wells on production which had
average gross initial production rates of 10.1 MMcf per day. Southwestern's
current net production from the James Lime is approximately 38.6 MMcf per day.
Production from the company's East Texas properties was 15.6 Bcfe for the
first six months of 2009, compared to 16.0 Bcfe for the first six months of
2008.

Conventional Arkoma Program - (Outside the Fayetteville Shale play area)
Southwestern participated in drilling 13 wells in its conventional Arkoma
Basin drilling program during the first six months of 2009. Production from
the company's conventional Arkoma Basin was 11.6 Bcf for the first six months
of 2009, compared to 11.9 Bcf for the first six months of 2008.

New Ventures - At June 30, 2009, Southwestern held approximately 160,500 net
undeveloped acres in the United States outside of its core operating areas in
connection with New Ventures, including approximately 138,300 net acres in
Pennsylvania under which it believes the Marcellus Shale is prospective.

Explanation and Reconciliation of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). However,
management believes certain non-GAAP performance measures may provide users of
this financial information additional meaningful comparisons between current
results and the results of our peers and of prior periods.

One such non-GAAP financial measure is net cash provided by operating
activities before changes in operating assets and liabilities. Management
presents this measure because (i) it is accepted as an indicator of an oil and
gas exploration and production company's ability to internally fund
exploration and development activities and to service or incur additional
debt, (ii) changes in operating assets and liabilities relate to the timing of
cash receipts and disbursements which the company may not control and (iii)
changes in operating assets and liabilities may not relate to the period in
which the operating activities occurred.

Additional non-GAAP financial measures we may present from time to time are
net income attributable to Southwestern Energy, diluted earnings per share
attributable to Southwestern Energy stockholders and our E&P segment operating
income, all which exclude certain charges or amounts. Management presents
these measures because (i) they are consistent with the manner in which the
Company's performance is measured relative to the performance of its peers,
(ii) these measures are more comparable to earnings estimates provided by
securities analysts, and (iii) charges or amounts excluded cannot be
reasonably estimated and guidance provided by the Company excludes information
regarding these types of items. These adjusted amounts are not a measure of
financial performance under GAAP.

See the reconciliations below of GAAP financial measures to non-GAAP financial
measures for the three and six months ended June 30, 2009 and June 30, 2008.
Non-GAAP financial measures should not be considered in isolation or as a
substitute for the Company's reported results prepared in accordance with
GAAP.

6 Months Ended June 30,
-----------------------
2009 2008
---- ----
(in thousands)
Net income (loss) attributable to
Southwestern Energy:
Net income (loss) attributable to
Southwestern Energy $(311,730) $245,579
Add back:
Impairment of natural gas and oil
properties (net of taxes) 558,305 --
------- -----
Net income attributable to Southwestern
Energy, excluding impairment of natural
gas and oil properties $246,575 $245,579
======== ========

6 Months Ended June 30,
-----------------------
2009 2008
---- ----
Diluted earnings per share:
Net income (loss) per share attributable to $(0.91) $0.71
Southwestern Energy stockholders
Add back:
Impairment of natural gas and oil properties
(net of taxes) 1.62 --
---- -----
Net income per share attributable to Southwestern
Energy stockholders, excluding impairment of
natural gas and oil properties $0.71 $0.71
===== =====

3 Months Ended June 30,
-----------------------
2009 2008
---- ----
(in thousands)
Cash flow from operating activities:
Net cash provided by operating activities $266,436 $291,165
Add back (deduct):
Change in operating assets and liabilities 58,860 (2,935)
------ ------
Net cash provided by operating activities
before changes in operating assets and
liabilities $325,296 $288,230
======== ========

6 Months Ended June 30,
-----------------------
2009 2008
---- ----
(in thousands)
Cash flow from operating activities:
Net cash provided by operating activities $673,731 $588,252
Add back (deduct):
Change in operating assets and liabilities 24,120 (16,305)
------ -------
Net cash provided by operating activities
before changes in operating assets and
liabilities $697,851 $571,947
======== ========

6 Months Ended June 30,
-----------------------
2009 2008
---- ----
(in thousands)
E&P segment operating income:
E&P segment operating income (loss) $(553,460) $380,796
Add back:
Impairment of natural gas and oil properties 907,812 --
------- -----
E&P segment operating income excluding impairment
of natural gas and oil properties $354,352 $380,796
======== ========

Southwestern will host a teleconference call on Friday, July 31, 2009, at
10:00 a.m. Eastern to discuss the company's second quarter 2009 results. The
toll-free number to call is 877-407-8035 and the international toll-free
number is 201-689-8035. The teleconference can also be heard "live" on the
Internet at http://www.swn.com.

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

All statements, other than historical financial information, may be deemed to
be forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. 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 the company's
future operations, are forward-looking statements. Although the company
believes the expectations expressed in such forward-looking statements are
based on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from
those in the forward-looking statements. The company has no obligation and
makes no undertaking to publicly update or revise any forward-looking
statements. 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 the company's operations, markets, products, services and
prices and cause its 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
the company's 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); the company's ability to transport
its production to the most favorable markets or at all; the timing and extent
of the company's success in discovering, developing, producing and estimating
reserves; the economic viability of, and the company's success in drilling,
the company's large acreage position in the Fayetteville Shale play, overall
as well as relative to other productive shale gas plays; the company's ability
to fund the company's planned capital investments; the company's ability to
determine the most effective and economic fracture stimulation for the
Fayetteville Shale formation; the impact of federal, state and local
government regulation, including any increase in severance taxes; the costs
and availability of oil field personnel services and drilling supplies, raw
materials, and equipment and services; the company's future property
acquisition or divestiture activities; increased competition; 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 the company's lenders to provide it with
funds as agreed; credit risk relating to the risk of loss as a result of
non-performance by the company's counterparties and any other factors listed
in the reports the company has filed and may file with the Securities and
Exchange Commission (SEC). For additional information with respect to certain
of these and other factors, see the reports filed by the company with the SEC.
The company disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Financial Summary Follows

OPERATING STATISTICS (Unaudited)
Southwestern Energy Company and Subsidiaries

Three Months Six Months
Periods Ended June 30 2009 2008 2009 2008
---- ---- ---- ----

Exploration & Production
------------------------
Production
Gas production (MMcf) 74,120 44,312 137,809 82,517
Oil production (MBbls) 32 127 66 269
Total equivalent production (MMcfe) 74,315 45,075 138,208 84,132
------ ------ ------- ------
Commodity Prices
Average gas price per Mcf,
including hedges $5.01 $8.17 $5.44 $7.95
Average gas price per Mcf,
excluding hedges $2.90 $10.00 $3.32 $8.82
Average oil price per Bbl $51.91 $122.26 $43.24 $108.69
------ ------- ------ -------
Operating Expenses per Mcfe
Lease operating expenses $0.73 $0.95 $0.76 $0.87
General & administrative expenses $0.34 $0.41 $0.32 $0.42
Taxes, other than income taxes $0.08 $0.16 $0.10 $0.16
Full cost pool amortization $1.46 $2.01 $1.63 $2.15

Midstream
---------
Gas volumes marketed (Bcf) 89.1 59.5 175.6 109.6
Gas volumes gathered (Bcf) 94.9 49.9 174.4 88.4

STATEMENTS OF OPERATIONS (Unaudited)
Southwestern Energy Company and Subsidiaries

Three Months Six Months
Periods Ended June 30 2009 2008 2009 2008
--------------------- ---- ---- ---- ----
(in thousands except share/per share amounts)
Operating Revenues
Gas sales $367,430 $371,114 $740,088 $733,705
Gas marketing 91,438 205,836 243,010 341,143
Oil sales 1,693 15,538 2,875 29,251
Gas gathering 16,865 9,186 33,428 17,472
Other 94 2,696 (1,064) 6,905
--- ----- ------ -----
477,520 604,370 1,018,337 1,128,476
------- ------- --------- ---------
Operating Costs and
Expenses
Gas purchases -
midstream services 91,187 202,889 240,367 335,341
Gas purchases - gas
distribution - 9,544 - 61,439
Operating expenses 30,506 30,030 57,678 54,026
General and
administrative expenses 29,200 25,741 52,909 49,481
Depreciation, depletion
and amortization 117,927 98,151 242,155 195,248
Impairment of natural
gas and oil properties - - 907,812 -
Taxes, other than income
taxes 6,473 8,729 15,681 16,145
----- ----- ------ ------
275,293 375,084 1,516,602 711,680
------- ------- --------- -------
Operating Income (Loss) 202,227 229,286 (498,265) 416,796
------- ------- -------- -------
Interest Expense
Interest on debt 13,725 15,659 27,910 32,745
Other interest charges 870 619 1,529 1,267
Interest capitalized (11,529) (7,281) (22,689) (13,486)
-------- ------ -------- --------
3,066 8,997 6,750 20,526
----- ----- ----- ------
Other Income 169 169 534 176
--- --- --- ---
Income (Loss) Before
Income Taxes 199,330 220,458 (504,481) 396,446
------- ------- -------- -------
Provision (Benefit)
for Income Taxes
Current - 46,500 (35,500) 46,500
Deferred 78,272 37,193 (157,187) 104,017
------ ------ -------- -------
78,272 83,693 (192,687) 150,517
------ ------ -------- -------
Net income (loss) 121,058 136,765 (311,794) 245,929
Less: net income (loss)
attributable to
noncontrolling interest (42) 215 (64) 350
--- --- --- ---
Net Income (Loss)
Attributable to
Southwestern Energy $121,100 $136,550 $(311,730) $245,579
-------- -------- --------- --------
Earnings Per Share
Net income (loss)
attributable to
Southwestern Energy
stockholders - Basic $0.35 $0.40 $(0.91) $0.72
Net income (loss)
attributable to
Southwestern Energy
stockholders -
Diluted $0.35 $0.39 $(0.91) $0.71
----- ----- ------ -----
Weighted Average Common
Shares Outstanding
Basic 342,960,373 341,402,888 342,766,760 341,233,574
Diluted 348,806,860 346,551,198 342,766,760 346,287,843

BALANCE SHEETS (Unaudited)
Southwestern Energy Company and Subsidiaries

June 30 2009 2008
------- ---- ----
(in thousands)
ASSETS

Current Assets $664,776 $759,329
Current Assets Held For Sale - 42,926
--- ------
Property and Equipment 6,298,500 4,510,372
Less: Accumulated depreciation,
depletion and amortization 2,767,225 1,392,380
--------- ---------
3,531,275 3,117,992
--------- ---------
Other Assets 142,231 74,242
Assets Held For Sale - 142,971
--- -------
$4,338,282 $4,137,460
---------- ----------

LIABILITIES AND EQUITY

Current Liabilities $644,224 $1,129,771
Current Liabilities Associated With
Assets Held For Sale - 32,633
--- ------
Long-Term Debt 869,600 674,800
------- -------
Deferred Income Taxes 554,434 450,089
------- -------
Long-Term Hedging Liability 4,012 301,668
----- -------
Other Liabilities 57,668 57,774
Other Liabilities Associated With Assets
Held For Sale - 17,005
--- ------
Commitments and Contingencies
Equity
Common stock, $.01 par value; authorized
540,000,000 shares, issued 344,486,505
shares in 2009 and 342,786,381 in 2008 3,445 3,428
Additional paid-in capital 822,428 798,750
Retained earnings 1,138,247 1,127,610
Accumulated other comprehensive income
(loss) 238,550 (462,061)
Common stock in treasury, 203,059 shares
in 2009 and 224,594 in 2008 (4,300) (4,725)
------ ------
Total Southwestern Energy stockholders'
equity 2,198,370 1,463,002
Noncontrolling interest 9,974 10,718
----- ------
Total equity 2,208,344 1,473,720
--------- ---------
$4,338,282 $4,137,460
---------- ----------

STATEMENTS OF CASH FLOWS (Unaudited)
Southwestern Energy Company and Subsidiaries

Six Months
Periods Ended June 30 2009 2008
--------------------- ---- ----
(in thousands)

Cash Flows From Operating Activities
Net income (loss) $(311,794) $245,929
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 242,983 196,411
Impairment of natural gas and oil properties 907,812 -
Deferred income taxes (157,187) 104,017
Impairment of natural gas inventory 4,283 -
Unrealized loss on derivatives 6,039 20,345
Stock-based compensation expense 5,810 5,839
Gain on sale of property and equipment - (392)
Distributions to noncontrolling interest in
partnership (95) (202)
Change in assets and liabilities (24,120) 16,305
------- ------
Net cash provided by operating activities 673,731 588,252
------- -------

Cash Flows From Investing Activities
Capital investments (963,976) (812,421)
Proceeds from sale of property and equipment - 590,513
Other items (4,144) (296)
------ ----
Net cash used in investing activities (968,120) (222,204)
--------- --------

Cash Flows From Financing Activities
Payments on short-term debt (60,600) (600)
Payments on revolving long-term debt (339,500) (1,843,600)
Borrowings under revolving long-term debt 535,500 1,001,400
Proceeds from issuance of long-term debt - 600,000
Debt issuance costs and revolving credit
facility costs - (8,895)
Excess tax benefit for stock-based compensation - 39,332
Change in bank drafts outstanding (38,401) 19,643
Proceeds from exercise of common stock options 3,358 2,067
----- -----
Net cash provided by (used in) financing
activities 100,357 (190,653)
------- --------

Increase (decrease) in cash and cash
equivalents (194,032) 175,395
Cash and cash equivalents at beginning
of year(1) 196,277 1,832
------- -----
Cash and cash equivalents at end of period(1) $2,245 $177,227
------ --------

(1) Cash and cash equivalents at the beginning of the year for 2008 and
at June 30, 2008 include $1.1 million and $0.1 million, respectively,
classified as "held for sale."

SEGMENT INFORMATION (Unaudited)
Southwestern Energy Company and Subsidiaries

Exploration
& Midstream
Production Services Other(1) Eliminations Total
----------- --------- ------- ------------ -----
Quarter Ending (in thousands)
June 30, 2009
--------------

Revenues $372,681 $337,164 $231 $(232,556) $477,520
Gas purchases - 285,208 - (194,021) 91,187
Operating expenses 54,303 14,620 - (38,417) 30,506
General &
administrative
expenses 25,000 4,293 25 (118) 29,200
Depreciation,
depletion &
amortization 113,357 4,375 195 - 117,927
Taxes, other than
income taxes 5,588 876 9 - 6,473
----- --- --- --- -----
Operating Income $174,433 $27,792 $2 $- $202,227
-------- ------- --- --- --------

Capital
Investments (2) $402,079 $51,535 $2,622 $- $456,236

Quarter Ending
June 30, 2008
--------------

Revenues $377,725 $639,758 $33,631 $(446,744) $604,370
Gas purchases - 609,366 20,463 (417,396) 212,433
Operating expenses 42,964 8,967 7,299 (29,200) 30,030
General &
administrative
expenses 18,378 3,333 4,178 (148) 25,741
Depreciation,
depletion &
amortization 94,031 2,370 1,750 - 98,151
Taxes, other than
income taxes 7,266 720 743 - 8,729
----- --- --- --- -----
Operating Income
(Loss) $215,086 $15,002 $(802) $- $229,286
-------- ------- ----- --- --------

Capital
Investments (2) $362,821 $47,878 $4,843 $- $415,542

Six Months Ending
June 30, 2009
-----------------

Revenues $750,766 $730,638 $463 $(463,530) $1,018,337
Gas purchases - 629,611 - (389,244) 240,367
Operating expenses 104,353 27,381 - (74,056) 57,678
General &
administrative
expenses 44,696 8,409 34 (230) 52,909
Depreciation,
depletion &
amortization 233,488 8,301 366 - 242,155
Impairment of
natural gas and
oil properties 907,812 - - - 907,812
Taxes, other than
income taxes 13,877 1,782 22 - 15,681
------ ----- --- --- ------
Operating Income
(Loss) $(553,460) $55,154 $41 $- $(498,265)
--------- ------- --- --- ---------

Capital
Investments (2) $852,482 $102,456 4,490 $- $959,428

Six Months Ending
June 30, 2008
-----------------

Revenues $689,742 $1,045,083 $117,934 $(724,283) $1,128,476
Gas purchases - 992,426 79,120 (674,766) 396,780
Operating expenses 73,213 15,902 14,139 (49,228) 54,026
General &
administrative
expenses 34,931 6,126 8,713 (289) 49,481
Depreciation,
depletion &
amortization 187,337 4,407 3,504 - 195,248
Taxes, other than
income taxes 13,465 1,059 1,621 - 16,145
------ ----- ----- --- ------
Operating Income $380,796 $25,163 $10,837 $- $416,796
-------- ------- ------- --- --------

Capital
Investments (2) $739,335 $79,323 $6,742 $- $825,400

(1) The three- and six-month periods ended June 30, 2008 include operating
results and capital investments associated with our natural gas
distribution subsidiary, Arkansas Western Gas ("AWG"). On July 1,
2008, we closed the sale of AWG and, as a result, we no longer have
any natural distribution operations.
(2) Capital investments include reductions of $31.8 million and $8.2
million for the three- and six-month periods ended June 30, 2009,
respectively, and a reduction of $6.8 million and an increase of $10.0
million for the three- and six-month periods ended June 30, 2008,
respectively, relating to the change in accrued expenditures between
periods.

SOURCE Southwestern Energy Company

Greg D. Kerley, Executive Vice President and Chief Financial Officer,
+1-281-618-4803, or Brad D. Sylvester, CFA, Vice President, Investor
Relations, +1-281-618-4897, both of Southwestern Energy Company