Southwestern Energy Company is an independent energy company primarily engaged
in the exploration for and production of natural gas within the United States.
We also focus on creating and capturing additional value through our natural
gas gathering and marketing businesses, which we refer to as our Midstream Services.
We operate principally in three segments – Exploration and Production,
or E&P, Midstream Services and Natural Gas Distribution
Exploration and Production - Our primary business is natural gas and oil exploration,
development and production within the United States, with operations principally
located in Arkansas, Oklahoma and Texas. Our operations are primarily conducted
through our wholly-owned subsidiaries, SEECO, Inc. and Southwestern Energy Production
Company, or SEPCO. SEECO operates exclusively in Arkansas, holds a large base
of both developed and undeveloped gas reserves and conducts both the drilling
program for the Fayetteville Shale play and the ongoing conventional drilling
program in the Arkansas part of the Arkoma Basin. SEPCO conducts development
drilling and exploration programs in the Oklahoma portion of the Arkoma Basin
and in Texas. DeSoto Drilling, Inc., or DDI, a wholly-owned subsidiary of SEPCO,
operates drilling rigs in the Fayetteville Shale play and in East Texas.
Midstream Services - Our Midstream Services segment generates revenue from gathering
fees associated with the transportation of natural gas to market and through
the marketing of our own gas production and some third-party natural gas. Our
gathering subsidiary, DeSoto Gathering Company, L.L.C., engages in gas gathering
activities primarily related to the development of our Fayetteville Shale play.
Our gas marketing subsidiary, Southwestern Energy Services Company, or SES,
captures downstream opportunities which arise through marketing and transportation
activity.
Natural Gas Distribution - Our wholly-owned subsidiary, Arkansas Western Gas
Company, or AWG, operates integrated natural gas distribution systems in northern
Arkansas serving approximately 152,000 retail customers. On November 14, 2007,
we announced that we had entered into a definitive agreement for the sale of
AWG to SourceGas LLC for $224 million plus working capital. Upon the consummation
of the pending sale of AWG, we will cease to have any natural gas distribution
operations.
Competition
All phases of the oil and gas industry are highly competitive. We compete in
the acquisition of properties, the search for and development of reserves, the
production and sale of natural gas and oil and the securing of labor and equipment
required to conduct our operations. Our competitors include major oil and gas
companies, other independent oil and gas companies and individual producers
and operators. Many of these competitors have financial and other resources
that substantially exceed those available to us.
Our gas marketing activities compete with numerous other companies offering
the same services, many of which possess larger financial and other resources
than we have. Some of these competitors are affiliates of companies with extensive
pipeline systems that are used for transportation from producers to end-users.
Other factors affecting competition are the cost and availability of alternative
fuels, the level of consumer demand and the cost of and proximity to pipelines
and other transportation facilities.
AWG has historically maintained a price advantage over alternative fuels such
as electricity, fuel oil and propane for most applications, enabling it to achieve
excellent market penetration levels. However, AWG has experienced a general
trend in recent years toward lower rates of usage among its customers, largely
as a result of conservation efforts, as well as increasing competition from
alternative fuels that has eroded its price advantage.
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