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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 23, 2002
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SOUTHWESTERN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
Arkansas 1 - 8246 71-0205415
(State of incorporation (Commission (I.R.S. Employer
or organization) File Number) 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)
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-1-
Item 7.(c)
Exhibits Reference
(99.1) Slide presentation accompanying the April 23, 2002
presentation and simultaneous webcast to investors at the
New York Sheraton Hotel & Towers in New York, New York
during the 2002 IPAA Oil & Gas Investment Symposium. p. 3 - 12
Item 9.
Regulation FD Disclosures
On April 23, 2002, Harold M. Korell, President and Chief Executive
Officer for Southwestern Energy Company, made a presentation to investors at the
New York Sheraton Hotel & Towers in New York, New York during the 2002 IPAA Oil
& Gas Investment Symposium. The accompanying slideshow was made available on the
Company's web site (www.swn.com) the day of the presentation and is furnished
herewith as Exhibit 99.1.
Southwestern Energy Company is furnishing under Item 9 of this Current
Report on Form 8-K the information included as exhibit 99.1 to this report.
Note: The information in this report (including the exhibit) is furnished
pursuant to Item 9 and shall not be deemed to be "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that section. This report will not be deemed an admission as to
the materiality of any information in the report that is required to be
disclosed solely by Regulation FD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHWESTERN ENERGY COMPANY
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Registrant
DATE: April 24, 2002 BY: /s/ GREG D. KERLEY
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Greg D. Kerley
Executive Vice President
and Chief Financial Officer
- 2 -
Slide Presentation dated April 23, 2002
Slides prepared for use with April 23, 2002, presentation to investors at the
IPAA Oil and Gas Investment Symposium.
(slide 1)
Southwestern Energy Company
Presentation to IPAA Oil & Gas Investment Symposium
[NYSE: SWN]
[picture of crescent and other wrenches]
(slide 2)
Southwestern Energy Company (NYSE: SWN)
General Information
Southwestern Energy Company is primarily focused on natural gas.
Southwestern's strategy is to add $1.30 to $1.50 in discounted value for every
dollar invested in a well-balanced exploration and production program in the
Arkoma and Permian Basins, East Texas and the onshore Gulf Coast.
Market Data as of April 15, 2002
Shares of Common Stock Outstanding - 25,502,070
Market Capitalization - $357,000,000
Institutional Ownership - 74.3%
Management Ownership - 9.3%
52-Week Price Range - $9.64 (12/19/2001) - $15.95 (5/18/2001)
Investor Contacts
Greg D. Kerley
Executive Vice President and Chief Financial Officer
Phone: (281) 618-4803 Fax: (281) 618-4820
Brad D. Sylvester, CFA
Manager, Investor Relations
Phone: (281) 618-4897 Fax: (281) 618-4820
(slide 3)
Business Strategy
[slide stating formula which represents Company's strategy: The Right People
doing the Right Things, supported by the value of our underlying Assets will
create Value +.]
(slide 4)
Southwestern Energy Company
[map showing the states of Arkansas, Louisiana, Texas, Oklahoma and New Mexico
with the following areas identified: Arkoma Basin with the Company's Gas
distribution system and Ozark Pipeline, Anadarko Basin, Permian Basin, East
Texas (Overton Field) and Gulf Coast]
- 3 -
2001 Reserves: 402.0 Bcfe, 80% PDP
Shares Outstanding: 25.5 MM
52-Week Range: $9.64 - $15.95
Debt Ratings: BBB (S&P)
Baa3 (Moody's)
(slide 5)
Cash Flow per Mcfe - SWN is Competitive
[graphs comparing Southwestern Energy Company's 3-year average Cash Flow per
Mcfe of Production and Cash Flow per Mcfe of Reserves versus a peer group.] For
E&P segment only, cash flow per Mcfe of production is $1.90 and cash flow per
Mcfe of reserves is $.18.
(slide 6)
Key Developments
1999
o Positive E&P results.
>> Reserve additions of 49 Bcfe replaced 150% of production at $1.20 per
Mcfe.*
>> First success in Gulf Coast exploration (Gloria).
>> Developed excellent inventory of internally-generated exploration
prospects.
2000
o Strong E&P results.
>> Reserve additions of 70 Bcfe replaced 196% of production at $0.99 per
Mcfe.*
>> Production increased over 8% from 1999 levels.
>> Two meaningful discoveries in South Louisiana (N. Grosbec, Havilah).
o Supreme Court upheld jury verdict and judgment of $109 million.
2001
o Record E&P results.
>> Reserve additions of 89 Bcfe replaced 224% of production at $1.11 per
Mcfe.*
>> Production increased 11% from 2000 levels.
>> Three exploration discoveries in South Louisiana (Malone, Horeb,
Crowne).
o Drilled 15 wells at Overton. Well performance exceeded expectations.
o Reduced long-term debt by $46 million.
*Excludes reserve revisions.
(Slide 7)
E&P Results - Standing Out
(For the periods ended December 31)
- 4 -
1999 2000 2001
Production (Bcfe) 32.9 35.7 39.8
Reserve Replacement 150% 196% 224%
Reserve Additions (Bcfe) 49.3 70.1 89.3
F&D Cost ($/Mcfe) $1.20 $0.99 $1.11
Reserve data excludes revisions
(Slide 8)
Objectives
o Invest in the hightest PVI projects. In 2002, add $1.30 to $1.50 of
discounted value for each dollar invested.
o Maximize cash flow to fund E&P program and pay down debt.
o Over a multi-year program, achieve 10% annual growth in production and
reserves.
o Reduce debt-to-total capital ratio over time to 50 - 55%.
(slide 9)
E&P Assets and Strategy - Organic Growth
[map showing the states of Arkansas, Louisiana, Texas, Oklahoma and New Mexico
with the following areas identified: Mid-Continent in north Texas and western
Oklahoma, including the panhandle; Arkoma in western Arkansas and eastern
Oklahoma; Texas/New Mexico in southeast New Mexico and eastern, central and the
gulf coast areas of Texas; and South Louisiana in gulf coast region of
Louisiana]
Mid-Continent
Reserves - 36.6 Bcfe (9%)
Production - 2.8 Bcfe (7%)
Arkoma
Reserves - 186.0Bcf (46%)
Production - 22.3 Bcf (56%)
2002 Capital - $18.5 MM (30%)
Texas/New Mexico
Reserves - 137.0 Bcfe (34%)
Production - 9.9 Bcfe (25%)
2002 Capital - $21.6 MM (35%)
South Louisiana
Reserves - 42.4 Bcfe (11%)
Production - 4.8 Bcfe (12%)
2002 Capital - $21.2 MM (35%)
o Arkoma Basin Strategy: Maintain our strong position through low-risk
development drilling.
o Texas/New Mexico Strategy: Growth through medium-risk exploration and
Overton infill drilling.
- 5 -
o South Louisiana Strategy: Growth through high-potential exploration.
(slide 10)
Arkoma Basin
[map showing location of Arkoma Basin in Arkansas and Oklahoma, the Arkoma Basin
Fairway, the Ranger Anticline Prospect and the Haileyville Prospect.]
Arkoma Basin
3-year average results
Reserve replacement: 96%
LOE Cost (incl. Taxes) ($/Mcf): $0.26
F&D Cost ($/Mcf): $1.05
Ranger Anticline
Success: 10/14 wells
Net EUR: 12.4 Bcf
F&D/Mcf: $.69
Haileyville
Success: 13/20 wells
Net EUR: 9.7 Bcf
F&D/Mcf: $.74
o "Legacy asset" that provides SWN with a stable production/reserve base and
low-risk drilling opportunities.
o Competitive advantages:
>> 50+ years of experience in the basin.
>> Large acreage position of 348,000 gross acres and 237,000 net acres.
o 2001 - Drilled 52 wells (81% successful) and grew production 12% over 2000
levels.
o 2002 capital program includes drilling 40 wells and 50 workovers.
(slide 11)
Overton Field - Multi-Year Drilling Program
[map showing Overton Field area, including South Overton farm-in acreage of
5,800 acres, with producing well locations]
Overton Field Drilling Potential
#Wells #Wells
@160s @80s
------- -------
Orginial Wells 16 16
2001 Drilling 15 15
Future Development 32 94
- ------- -------
- 6 -
TOTAL 63 125
======= =======
o Purchased 7.5 Bcfe for $6.1 million in 2000 (developed at 640-acre
spacing).
o Drilled 15 wells in 2001. Currently drilled to 320-acre units.
o Opportunity to downspace to 160-acre spacing (32 wells) and 80-acre spacing
(94 wells).
Overton Field Gross Production Rate
[graph showing Overton Field gross production rate increasing from 1.7 MMcf/d in
June 2000 to 16.7 MMcf/d in March 2002].
(slide 12)
South Louisiana Exploration
[map showing location of the 2002 proposed wells, the 3-D project areas, and the
Horeb, Havilah, Malone, North Grosbec, Gloria, and Crowne Discoveries.
Gross EUR:
North Grosbec 90 + Bcfe
Gloria 15 + Bcfe
Malone 30 + Bcfe
Horeb 9 + Bcfe
Havilah 16 + Bcfe
Crowne
Discovery Date W.I. Current Gross Producing Rate
Gloria Dec 1999 50% 2.1 MMcfd and 63 Bopd
North Grosbec Feb 2000 25% 39.7 MMcfd and 1,450 Bopd
Havilah Nov 2000 28% 5.0 MMcfd and 307 Bopd
Malone Feb 2001 33% 27.2 MMcfd and 538 Bopd
Horeb Nov 2001 21% 5.0 MMcfd and 53 Bopd
Crowne #1 Dec 2001 40% 12.2 MMcfd and 42 Bopd
Note: EUR - Estimated Ultimate Recovery.
(slide 13)
Exploration Potential - 219 Net Bcfe
Gross Res. Net Res.
Spud Working Potential Potential
Prospect Name Operator Date Interest Depth Objective (Bcfe) (Bcfe)
Arkoma Basin
Midway SWN 3Q 80.5% 11,400 Atoka 39.0 27.0
Permian Basin
N. Roepke SWN Producing 88.0% 8,100 Devonian 3.0 2.0
- 7 -
Billy Jack Par Evaluating 45.0% 6,500 Canyon 15.0 5.4
High Lonesome SWN 3Q 37.5% 11,000 Morrow 15.0 4.5
Birds of Prey SWN 3Q 50.0% 5,000 Cherry Canyon 6.0 2.5
Gaucho Deep Devon 4Q 50.0% 15,000 Devonian 30.0 12.0
Gulf Coast
Crowne SWN Prod/Eval 40.0% 13,500 Planulina 35.0 10.1
Tulleymore SWN Dry 40.0% 12,500 Planulina - -
Belmont -- 2Q 20.0% 13,500 Planulina 75.0 11.6
Piedmont SWN 2Q 75.0% 13,500 Planulina 28.3 16.8
Bushmills SWN 2Q 75.0% 15,200 Planulina 43.0 24.2
Cameron Prairie(5) Ballard 2Q 18.0% 13,500 Planulina 200.0 26.3
Red Lion SWN 4Q 40.0% 13,500 Planulina 19.0 6.0
Ben Nevis SWN 4Q 50.0% 12,900 Miocene 45.0 16.0
Jericho SWN 1Q 2003 50.0% 14,200 Frio 72.0 27.0
Tigris SWN 1Q 2003 50.0% 13,600 Frio 74.0 27.8
------- -------
Total Reserve Potential 699.3 219.1
Forward-Looking Statement
(slide 14)
E&P Capital Investments
[graph showing E&P capital investments from 1999 through the 2002 budgeted
program, broken out by Property Acquisitions, Capitalized Expenses, Leasehold &
Seismic, Development Drilling, and Exploration Drilling; total expenditures by
year were 1999 - $59.0 million, 2000 - $69.2 million, 2001 - $85.5 million (net
of $13.5 million reimbursement from Overton Field partnership), and 2002 budget
- $61.3 million. Company's 2002 budgeted capital investment program has 30%
allocated to Arkoma, 35% to South Louisiana, 15% to Permian and 20% to East
Texas.]
o Well-balanced capital program in 2002:
>> Low-risk Arkoma ($18.5 MM, 30%) and East Texas ($12.1 MM, 20%),
>> Medium-risk Permian Basin and other ($9.5 MM, 15%) and
>> Higher-risk, but larger potential South Louisiana ($21.2 MM, 35%).
o Over 65% of capital allocated to drilling in 2002.
o Identified exploration inventory has a net reserve exposure of
approximately 219 Bcfe.
(slide 15)
- 8 -
The Right People Doing the Right Things
[graph showing the Company's results in PVI, F&D Cost and Reserve Replacement
from 1997 to 2001] Note: PVI metrics calculated using pricing in effect at
year-end (except for 2000 which was calculated at $3.00 per Mcf natural gas
price). All metrics calculated exclude reserve revisions.
1997 1998 1999 2000 2001
F&D Cost ($/Mcfe) $2.53 $1.10 $1.20 $ .99 $1.11
Reserve Replacement 77% 129% 150% 196% 224%
PVI ($/$) $ .56 $1.17 $1.07 $1.30 $1.40
(slide 16)
Outlook for 2002
o Targets:
>> Production target of 41 - 43 Bcfe in 2002.
>> Excess cash flow goes toward long-term debt reduction.
NYMEX Commodity Price Assumptions
$2.00 Gas $2.25 Gas $2.50 Gas $3.00 Gas
$18.00 Oil $18.00 Oil $18.00 Oil $18.00 Oil
>> Earnings $7 MM $10 MM $12 MM $15 MM
>> EPS $.27 $.38 $.48 $.58
>> Cash Flow $72 MM $76 MM $81 MM $85 MM
>> CFPS $2.83 $2.99 $3.16 $3.34
>> EDITDA $93 MM $97 MM $102 MM $106 MM
Forward Looking Statement
(slide 17)
Gas Hedges in Place Through 2003
[chart showing gas hedges in place by quarter for the years 2002 and 2003]
Hedged Avg. Floor
Period Volumes Price
2002 25.5 Bcf $3.03/Mcf
2003 17.3 Bcf $3.10/Mcf
Note: Approximately .2 Bcf hedged at a fixed NYMEX price of $2.75 per Mcf in
first six months of 2003. Southwestern also has approximately 280,000 barrels of
oil hedged at a fixed WTI price of $20.07 per barrel in 2002.
(Slide 18)
The Road to V+
- 9 -
o Invest in the Highest PVI Projects.
o Maximize Cash Flow.
o Stay the Course with Our Balanced Strategy.
o Build on Exploration Success.
o Reduce Debt with Excess Cash Flow.
o Deliver the Numbers.
>> Production and Reserve Growth.
>> Add Value for Every Dollar Invested.
o Continue to Tell Our Story.
(slide 19)
Forward-Looking Statements
All statements, other than historical financial information may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Although the Company believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions, such statements
are not guarantees of future performance and actual results or developments may
differ materially from those in the forward-looking statements. Important
factors that could cause actual results to differ materially from those in the
forward- looking statements herein include, but are not limited to, the timing
and extent of changes in commodity prices for gas and oil, the timing and extent
of the Company's success in discovering, developing, producing, and estimating
reserves, property acquisition or divestiture activities that may occur, the
effects of weather and regulation on the Company's gas distribution segment,
increased competition, legal and economic factors, governmental regulation, the
financial impact of accounting regulations for derivative instruments, changing
market conditions, the comparative cost of alternative fuels, conditions in
capital markets and changes in interest rates, availability of oil field
services, drilling rigs, and other equipment, as well as other factors beyond
the Company's control.
(slide 20)
APPENDIX
(slide 21)
2001 Segment Contributions
[slide depicting business segment contributions in the following areas:]
Operating Income $57.8 MM
Exploration & Production 84%
Gas Distribution 12%
Marketing & Other 4%
Cash Flow $112.7 MM
Exploration & Production 86%
Gas Distribution 12%
- 10 -
Marketing & Other 2%
Assets $743.1 MM
Exploration & Production 71%
Gas Distribution 23%
Marketing & Other 6%
Capital Investments $106.1 MM
Exploration & Production 93%
Gas Distribution 5%
Marketing & Other 2%
Note: Cash flow is before changes in working captial.
(slide 22)
Financial & Operational Summary
Year Ended
2001 2000(1) 1999
-------------------------------------------------
($ in millions, except per share amounts)
Revenues $344.9 $363.9 $280.4
EBITDA 134.9 103.8 76.7
Net Income 35.3 20.5 9.9
Cash Flow (2) 112.7 82.4 60.8
Diluted Earnings per Share $1.38 $0.82 $0.40
Diluted Cash Flow per Share 4.40 3.29 2.44
Production Volume (Bcfe) 39.8 35.7 32.9
Avg. Gas Price per Mcf $3.85 $2.88 $2.21
Avg. Oil Price per Bbl $23.55 $22.99 $17.11
Finding cost ($/Mcfe)(3) $1.11 $0.99 $1.20
Reserve Replacement (3) 224% 196% 150%
(1) Before the effects of unusual and extraordinary items.
(2) Cash Flow is before changes in working capital.
(3) Excluding reserve revisions.
(slide 23)
U.S. Gas Consumption and Sources
[graph showing U.S. gas consumption, U.S. gas production and net imports from
1975 to 2001]
U.S. gas production basically flat since 1994 at 19,000 to 20,000 Bcf/year.
- 11 -
U.S. gas consumption basically same as gas production until 1986 then increases
at a higher rate (from approximately 20 Bcf/year in 1975 to a high of 23
Bcf/year in 2000 and down to 21 Bcf/year in 2001). Net imports flat until 1986
and begins increasing from 1 Bcf/year to 4 Bcf/year over time.
Source: EIA
(slide 24)
U.S. Electricity Consumption on the Rise
[graph dipicting billion kilowatt hours per month from 1977 (170/month) to 2001
(305/month)]
Source: Edison Electric Institute
(slide 25)
NYMEX Gas Prices
[graph comparing NYMEX gas prices from January 2000 to current]
Approximately $2/Mcf in January 2000, to a high of about $10/Mcf in January 2001
and down to approximately $3/Mcf currently.
Source: Energy Directions
(slide 26)
U.S. Gas Drilling
[graph showing rigs drilling for gas 1987 - 2002]
Approximately 350 in 1987 to a high in 2001 of 1,050 and currently down to 650
in 2002.
Source: Baker Hughes
(slide 27)
West Texas Intermediate Oil Prices
[graph comparing the price of oil/Bbl from January 2000 to current]
Prices of approximately $25/Bbl in January 2000, $27.5/Bbl in January 2001, down
to approximately $22/Bbl in January 2002 and $26/Bbl currently.
Source: Energy Directions
(slide 28)
Oil and Gas Price Comparison
[graph comparing the price of gas/MMBtu and Oil/Bbl 1995 - 2002]
Gas prices have varied from just over $1/Mcf to over $10/Mcf at different times
during period. Oil prices have varied from a low of $10/Bbl to a high of
approximately $40/Bbl during the time period.
Source: Energy Directions
- 12 -
Southwestern Energy Company
P.O. Box 1408
Fayetteville, AR 72702-1408
April 24, 2002
Securities and Exchange Commission
ATTN: Filing Desk, Stop 1-4
450 Fifth Street, N.W.
Washington, DC 20549-1004
Gentlemen:
Pursuant to regulations of the Securities and Exchange Commission, submitted
herewith for filing on behalf of Southwestern Energy Company is Form 8-K dated
April 23, 2002.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Very truly yours,
Stan Wilson
Controller