SOUTHWESTERN ENERGY CO - 10-Q Quarterly Report

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


FORM 10-Q

(Mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2002

or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from___________ to ___________

Commission file number 1-8246

SOUTHWESTERN ENERGY COMPANY
(Exact name of the registrant as specified in its charter)

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

2350 N. Sam Houston Pkwy. E., Suite 300, Houston, Texas 77032
(Address of principal executive offices, including zip code)

(281) 618-4700
(Registrant's telephone number, including area code)

No Change
(Former name, former address and former fiscal year: if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes: X		No:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class		Outstanding at August 9, 2002
Common Stock, Par Value $.10		25,722,083




- 1 -

PART I

FINANCIAL INFORMATION

- 2 -


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unuadited)

ASSETS

			June 30,		December 31,
			2002		2001
			($ in thousands)
Current Assets
	Cash		$	2,789		3,641
	Accounts Receivable			28,787		42,763
	Inventories, at average cost			25,434		26,606
	Hedging asset - SFAS No. 133			4,285		9,381
	Regulatory asset - hedges			-		5,817
	Other			3,925		4,996
		Total current assets		65,220		93,204

Investments				15,177		15,538

Property, Plant and Equipment, at cost
	Gas and oil properties, using the full cost method			1,008,402		970,680
	Gas distribution systems			194,800		192,784
	Gas in underground storage			30,807		32,046
	Other			30,547		30,110
				1,264,556		1,225,620
	Less: Accumulated depreciation, depletion
		and amortization		633,335		605,790
				631,221		619,830

Other Assets				13,359		14,551

Total Assets			$	724,977	$	743,123

The accompanying notes are an integral part of the financial statements.

- 3 -

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

LIABILITIES AND SHAREH0LDERS' EQUITY

			June 30,		December 31,
			2002		2001
			($ in thousands)
Current Liabilities
	Accounts payable		$	27,448	$	41,644
	Taxes payable			2,806		4,400
	Interest payable			2,414		2,653
	Customer deposits			4,699		4,845
	Hedging liability - SFAS No. 133			10,300		6,990
	Over-recovered purchased gas costs			6,732		8,184
	Other			4,182		2,752
		Total current liabilities		58,581		71,468

Long-Term Debt				344,500		350,000

Other Liabilities
	Deferred income taxes			119,719		122,381
	Other			7,721		3,187
				127,440		125,568

Commitments and Contingencies

Minority Interest in Partnership				13,161		13,001

Sharholders' Equity
	Common stock, $.10 par value; authorized
		75,000,000 shares, issued 27,738,084 shares		2,774		2,774
	Additional paid-in capital			19,433		19,764
	Retained earnings			192,162		183,677
	Accumulated other comprehensive income (loss)			(6,354)		5,763
				208,015		211,978
	Less:	Common stock in treasury, at cost, 2,054,972 shares
		in 2002 and 2,261,766 shares in 2001		23,571		25,196
		Unamortized cost of 420,562 restricted shares
		in 2002 and 416,537 restricted shares in 2001,
		issued under stock incentive plan		3,149		3,696
				181,295		183,086

Total Liabilities and Shareholders' Equity			$	724,977	$	743,123

The accompanying notes are an integral part of the financial statements

- 4 -

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2002		2001		2002		2001
Operating Revenues
	Gas sales	$	37,606	$	52,173	$	104,592	$	147,558
	Gas marketing		12,228		17,523		21,930		52,712
	Oil sales		4,416		4,682		7,599		8,844
	Gas transportation and other		1,754		1,645		3,541		4,038
			56,004		76,023		137,662		213,152
Operating Costs and Expenses
	Gas purchases - utility		3,804		9,370		28,572		50,498
	Gas purchases - marketing		11,454		16,845		20,127		50,580
	Operating expenses		9,505		9,215		19,063		19,678
	General and administrative expenses		6,034		7,580		11,824		12,407
	Depreciation, depletion and amortization		13,868		12,637		27,738		24,274
	Taxes, other than income taxes		2,439		2,361		4,599		5,101
			47,104		58,008		111,923		162,538
Operating Income			8,900		18,015		25,739		50,614
Interest Expense
	Interest on long-term debt		5,345		5,904		10,699		12,771
	Other interest charges		336		538		658		829
	Interest capitalized		(360)		(424)		(651)		(860)
			5,321		6,018		10,706		12,740
Other Income (Expense)			(232)		(358)		(474)		22
Income Before Income Taxes &
	Minority Interest		3,347		11,639		14,559		37,896
Minority Interest in Partnership			(469)		(384)		(762)		(384)
Income Before Income Taxes			2,878		11,255		13,797		37,512
Income Tax Provision
	Current		-		-		-		-
	Deferred		1,108		4,386		5,312		14,630
			1,108		4,386		5,312		14,630
Net Income			1,770		6,869		8,485		22,882

Basic Earnings Per Share			$0.07		$0.27		$0.34		$0.91
Basic Average Common Shares Outstanding			25,208,974		25,189,623		25,146,550		25,188,370
Diluted Earnings Per Share			$0.07		$0.27		$0.33		$0.89
Diluted Average Common Shares Outstanding			26,131,452		25,657,842		25,995,692		25,576,721

The accompanying notes are an integral part of the financial statements.

- 5 -

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

				Six Months Ended
				June 30,
				2002		2001
				($ in thousands)
Cash Flows From Operating Activitites
	Net income			$	8,485	$	22,882
	Adjustments to reconcile net income to
	net cash provided by operating activities:
		Depreciation, depletion and amortization			28,939		25,017
		Deferred income taxes			5,312		14,630
		Equity in loss of NOARK partnership			361		789
		Minority interest in partnership			160		384
		Change in assets and liabilities:
			Accounts receivable		13,976		39,099
			Inventories		1,172		(7,127)
			Under/over-recovered purchased gas costs		(1,452)		8,311
			Accounts payable		(14,196)		(19,419)
			Taxes payable		(1,594)		(1,426)
			Other current assets and liabilities		1,093		1,248
Net cash provided by operating activities					42,256		84,388

Cash Flows From Investing Activities
	Capital expenditures				(40,774)		(47,990)
	Investment in NOARK partnership				-		(1,449)
	Change in gas stored underground				1,239		(2,236)
	Other items				1,927		1,493
Net cash used in investing activities					(37,608)		(50,182)

Cash Flows From Financing Activities