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 September 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 October 21, 2002
Common Stock, Par Value $.10		25,724,259




- 1 -

PART I

FINANCIAL INFORMATION

- 2 -


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unuadited)

ASSETS

			September 30,		December 31,
			2002		2001
			($ in thousands)
Current Assets
	Cash		$	508		3,641
	Accounts receivable			23,807		42,244
	Inventories, at average cost			27,246		26,606
	Hedging asset - SFAS No. 133			3,337		9,381
	Regulatory asset - hedges			-		5,817
	Other			3,155		4,996
		Total current assets		58,053		92,685

Investments				15,138		15,538

Property, Plant and Equipment, at cost
	Gas and oil properties, using the full cost method			1,033,898		970,680
	Gas distribution systems			195,993		192,784
	Gas in underground storage			33,118		32,046
	Other			30,666		30,110
				1,293,675		1,225,620
	Less: Accumulated depreciation, depletion
		and amortization		646,547		605,790
				647,128		619,830

Other Assets				17,491		19,408

Total Assets			$	737,810	$	747,461

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

			September 30,		December 31,
			2002		2001
			($ in thousands)
Current Liabilities
	Accounts payable		$	24,417	$	41,644
	Taxes payable			2,342		4,400
	Interest payable			6,429		2,653
	Customer deposits			4,790		4,845
	Hedging liability - SFAS No. 133			13,876		6,990
	Over-recovered purchased gas costs			5,071		8,184
	Regulatory liability - hedges			2,978		-
	Other			2,882		2,752
		Total current liabilities		62,785		71,468

Long-Term Debt				353,200		350,000

Other Liabilities
	Deferred income taxes			118,577		122,381
	Other			10,246		7,525
				128,823		129,906

Commitments and Contingencies

Minority Interest in Partnership				12,818		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			19,059		19,764
	Retained earnings			193,436		183,677
	Accumulated other comprehensive income (loss)			(9,794)		5,763
				205,475		211,978
	Less:	Common stock in treasury, at cost, 2,013,825 shares
		in 2002 and 2,261,766 shares in 2001		22,434		25,196
		Unamortized cost of 420,083 restricted shares
		in 2002 and 416,537 restricted shares in 2001,
		issued under stock incentive plan		2,857		3,696
				180,184		183,086

Total Liabilities and Shareholders' Equity			$	737,810	$	747,461

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				Nine Months Ended
		September 30,				September 30,
		2002		2001		2002		2001
Operating Revenues
	Gas sales	$	35,656	$	41,975	$	140,248	$	189,533
	Gas marketing		10,018		11,392		31,948		64,104
	Oil sales		3,728		4,348		11,327		13,192
	Gas transportation and other		1,689		1,681		5,230		5,719
			51,091		59,396		188,753		272,548
Operating Costs and Expenses
	Gas purchases - utility		3,198		4,119		31,770		54,617
	Gas purchases - marketing		9,287		10,518		29,414		61,098
	Operating expenses		9,698		9,379		28,292		28,693
	General and administrative expenses		5,527		5,049		17,351		17,456
	Depreciation, depletion and amortization		13,323		13,881		41,061		38,155
	Taxes, other than income taxes		2,064		2,187		7,132		7,652
			43,097		45,133		155,020		207,671
Operating Income			7,994		14,263		33,733		64,877
Interest Expense
	Interest on long-term debt		5,510		5,787		16,209		18,558
	Other interest charges		287		180		945		1,009
	Interest capitalized		(364)		(375)		(1,015)		(1,235)
			5,433		5,592		16,139		18,332
Other Income (Expense)			(124)		(184)		(598)		(162)
Income Before Income Taxes &
	Minority Interest		2,437		8,487		16,996		46,383
Minority Interest in Partnership			(366)		(261)		(1,128)		(645)
Income Before Income Taxes			2,071		8,226		15,868		45,738
Income Tax Provision
	Current		-		-		-		-
	Deferred		797		3,208		6,109		17,838
			797		3,208		6,109		17,838
Net Income		$	1,274	$	5,018	$	9,759	$	27,900

Basic Earnings Per Share			$0.05		$0.20		$0.39		$1.11
Basic Average Common Shares Outstanding			25,306,920		25,190,387		25,195,812		25,189,045
Diluted Earnings Per Share			$0.05		$0.20		$0.37		$1.09
Diluted Average Common Shares Outstanding			26,096,616		25,621,214		26,029,923		25,591,554

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

- 5 -

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

				Nine Months Ended
				September 30,
				2002		2001
				($ in thousands)
Cash Flows From Operating Activities
	Net income			$	9,759	$	27,900
	Adjustments to reconcile net income to
	net cash provided by operating activities:
		Depreciation, depletion and amortization			42,864		39,342
		Deferred income taxes			6,109		17,838
		Equity in loss of NOARK partnership			400		1,043
		Minority interest in partnership			(183)		271
		Change in assets and liabilities:
			Accounts receivable		19,121		49,056
			Inventories		(640)		(9,112)
			Under/over-recovered purchased gas costs		(3,113)		10,845
			Accounts payable		(9,604)		(23,872)
			Interest payable		3,775		4,070
			Taxes payable		(2,058)		(1,955)
			Other assets and liabilities		1,975		(769)
Net cash provided by operating activities					68,405		114,657

Cash Flows From Investing Activities
	Capital expenditures				(67,829)		(77,143)
	Investment in NOARK partnership				-		(1,449)
	Change in gas stored underground				(1,072)		(4,986)
	Other items				(291)		484
Net cash used in investing activities