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, 2004

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 or other jurisdiction 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)

Not Applicable
(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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
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 July 27, 2004
Common Stock, Par Value $0.10		36,167,339

PART I

FINANCIAL INFORMATION


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

		For the three months ended				For the six months ended
		June 30,				June 30,
		2004		2003		2004		2003
		(in thousands, except share/per share amounts)
Operating Revenues:
	Gas sales	$	73,838	$	49,286	$	174,857	$	126,993
	Gas marketing		15,674		11,667		24,860		24,273
	Oil sales		4,008		3,821		8,342		7,280
	Gas transportation and other		2,907		1,713		8,158		6,596
			96,427		66,487		216,217		165,142
Operating Costs and Expenses:
	Gas purchases - utility		3,518		2,199		35,050		29,247
	Gas purchases - marketing		14,572		10,850		22,635		22,408
	Operating expenses		10,498		9,248		20,210		18,294
	General and administrative expenses		8,264		7,663		16,274		15,546
	Depreciation, depletion and amortization		17,091		13,686		32,617		26,069
	Taxes, other than income taxes		4,238		2,895		7,878		5,958
			58,181		46,541		134,664		117,522
Operating Income			38,246		19,946		81,553		47,620

Interest Expense:
	Interest on long-term debt		4,376		4,075		8,797		9,002
	Other interest charges		316		337		828		722
	Interest capitalized		(745)		(501)		(1,293)		(866)
			3,947		3,911		8,332		8,858
Other Income (Expense)			(868)		(63)		(547)		1,359

Income Before Income Taxes, Minority Interest & Accounting Change			33,431		15,972		72,674		40,121
Minority Interest in Partnership			(431)		(609)		(830)		(1,374)

Income Before Income Taxes & Accounting Change			33,000		15,363		71,844		38,747
Provision for Income Taxes - Deferred			12,210		5,837		26,582		14,724

Income Before Accounting Change			20,790		9,526		45,262		24,023
Cumulative Effect of Adoption of Accounting Principle			-		-		-		(855)

Net Income		$	20,790	$	9,526	$	45,262	$	23,168

Basic Earnings Per Share:
	Income Before Accounting Change		$0.58		$0.27		$1.27		$0.76
	Cumulative Effect of Adoption of Accounting Principle		-		-		-		(0.03)
	Net Income		$0.58		$0.27		$1.27		$0.73

Diluted Earnings Per Share:
	Income Before Accounting Change		$0.56		$0.26		$1.23		$0.74
	Cumulative Effect of Adoption of Accounting Principle		-		-		-		(0.03)
	Net Income		$0.56		$0.26		$1.23		$0.71

Weighted Average Common Shares Outstanding:
	Basic		35,671,456		35,053,171		35,610,454		31,614,921
	Diluted		36,825,281		36,087,726		36,719,929		32,558,360

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

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

ASSETS

			June 30,		December 31,
			2004		2003
			(in thousands)
Current Assets
	Cash		$	1,086	$	1,277
	Accounts receivable			53,915		58,543
	Inventories, at average cost			23,698		31,418
	Under-recovered purchased gas costs			1,745		1,107
	Hedging asset - SFAS No. 133			100		3,693
	Deferred income tax assets			6,773		-
	Other			4,053		4,272
		Total current assets		91,370		100,310

Investments				13,295		13,840

Property, Plant and Equipment, at cost
	Gas and oil properties, using the full cost method			1,325,351		1,201,917
	Gas distribution systems			205,556		203,793
	Gas in underground storage			32,254		33,256
	Other			33,142		30,038
				1,596,303		1,469,004
	Less: Accumulated depreciation, depletion and amortization			738,020		706,720
				858,283		762,284

Other Assets				15,490		14,276

Total Assets			$	978,438	$	890,710

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

3

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

			June 30,		December 31,
			2003		2002
			(in thousands)
Current Liabilities
	Accounts payable		$	63,993	$	54,186
	Taxes payable			4,695		5,692
	Interest payable			2,211		2,338
	Customer deposits			5,304		5,277
	Hedging liability - SFAS No. 133			28,646		20,997
	Regulatory liability - hedges			-		2,137
	Other			2,742		4,441
		Total current liabilities		107,591		95,068

Long-Term Debt				278,000		278,800