Southwestern Enjoys Substantial Revenue Increase in Q4 2007



Southwestern Energy Company reported that for the fourth quarter of 2007, the company had a net income of $71.6 million, or $0.41 per diluted share, compared to $33.8 million, or $0.20 per diluted share, for the same period in 2006, primarily due to a 68% increase in total gas and oil production and higher realized gas and oil prices. Net cash provided by operating activities before changes in operating assets and liabilities (non-GAAP; see reconciliation below), was $204.3 million in the fourth quarter of 2007, up from $108.7 million in 2006.

Operating income from the company's E&P segment was $113.6 million for the three months ended December 31, 2007, compared to $50.7 million for the same period in 2006. The increase was primarily due to higher production and realized natural gas prices.

Gas and oil production totaled 34.9 Bcfe for the three months ended December 31, 2007, up from 20.7 Bcfe in the fourth quarter of 2006, and included 19.9 Bcf from the company's Fayetteville Shale play, up from 5.5 Bcf in the fourth quarter of 2006.

Southwestern's average realized gas price was $6.90 per Mcf, including the effect of hedges, in the fourth quarter of 2007, up from $6.12 per Mcf in the fourth quarter of 2006. The company's commodity hedging activities increased its average gas price by $0.69 per Mcf during the fourth quarter of 2007 and by $0.19 per Mcf during the same period in 2006.

Disregarding the impact of commodity price hedges, the company's average price received for its gas production during the fourth quarter of 2007 was approximately $0.76 per Mcf lower than average NYMEX spot prices, compared to approximately $0.63 per Mcf lower during the fourth quarter of 2006. The increase in the deviation from NYMEX spot prices was attributable to wider locational market differentials in the company's core operating areas during the fourth quarter of 2007.

Southwestern's average realized oil price was $90.96 per barrel during the fourth quarter of 2007 compared to $52.58 per barrel in the fourth quarter of 2006, including the effect of hedges. The company's hedging activities decreased its average oil price $4.02 per barrel during the fourth quarter of 2006.

Lease operating expenses per unit of production for the company's E&P segment were $0.79 per Mcfe in the fourth quarter of 2007, compared to $0.76 per Mcfe in the fourth quarter of 2006. The increase was due to increases in gathering and compression, both primarily related to the company's Fayetteville Shale play. General and administrative expenses per unit of production were $0.52 per Mcfe in the fourth quarter of 2007, compared to $0.64 per Mcfe in the fourth quarter of 2006.

The decrease was due to 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 $0.09 per Mcfe in the fourth quarter of 2007, compared to $0.18 per Mcfe in the fourth quarter of 2006, primarily due to the accrual of severance tax refunds related to the company's East Texas production.

The company's full cost pool amortization rate increased to $2.39 per Mcfe in the fourth quarter of 2007, compared to $2.16 per Mcfe in the fourth quarter of 2006.


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