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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-K
(Mark one)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required)
For the fiscal year ended December 31, 1994
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from ______________ to ______________
Commission file number 1-8246
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SOUTHWESTERN ENERGY COMPANY
(Exact name of registrant as specified in charter)
ARKANSAS 71-0205415
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1083 Sain Street, Fayetteville, Arkansas 72703
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (501) 521-1141
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock - Par Value $.10 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 Exchange Act of
1934 during the preceding 12 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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __________
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $351,357,014 based on the New York Stock Exchange -
Composite Transactions closing price on March 24, 1995 of $13.875.
The number of shares outstanding as of March 24, 1995, of the
Registrant's common stock, par value $.10, was 25,607,365.
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference and the Part of the Form 10-K into
which the document is incorporated: (1) Annual Report to holders of the
Registrant's common stock for fiscal year ended December 31, 1994 - PARTS I, II,
and IV; and (2) definitive proxy statement to holders of the Registrant's common
stock in connection with the solicitation of proxies to be used in voting at the
Annual Meeting of Shareholders on May 31, 1995 - PART III.
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SOUTHWESTERN ENERGY COMPANY
FORM 10-K
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1994
TABLE OF CONTENTS
PART I
Page
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Item 1. Business ............................................................................... 1
Natural gas and oil exploration and production ......................................... 1
Natural gas gathering, transmission and distribution ................................... 4
Real estate development ................................................................ 9
Employees .............................................................................. 9
Industry segment and statistical information ........................................... 9
Item 2. Properties ............................................................................. 9
Item 3. Legal Proceedings ...................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders .................................... 11
Executive Officers of the Registrant ................................................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters .................. 12
Item 6. Selected Financial Data ................................................................ 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .. 12
Item 8. Financial Statements and Supplementary Data ............................................ 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ... 12
PART III
Item 10. Directors and Executive Officers of the Registrant ..................................... 12
Item 11. Executive Compensation ................................................................. 12
Item 12. Security Ownership of Certain Beneficial Owners and Management ......................... 12
Item 13. Certain Relationships and Related Transactions ......................................... 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........................ 13
PART I
ITEM 1. BUSINESS
Southwestern Energy Company (the Company) is a diversified natural gas
company which conducts its primary activities through four wholly owned
subsidiaries. The Company operates principally in the exploration and production
segment, the gas distribution segment and the gas transmission segment of the
natural gas industry. The Company was incorporated on July 2, 1929, under the
laws of the state of Arkansas. The Company operates an integrated natural gas
gathering, transmission and distribution system in northwest Arkansas, and
natural gas distribution systems in northeast Arkansas and parts of Missouri.
The nature of the Company's natural gas transmission and distribution operations
changed in 1992 when a new 258 mile long intrastate pipeline in which the
Company owns an interest commenced operations. The intrastate pipeline crosses
three interstate pipelines and ties the Company's distribution and gathering
pipeline systems in northwest Arkansas to its distribution systems in northeast
Arkansas and southeast Missouri. The Company also serves as operator of the
pipeline. In 1943, the Company commenced a program of exploration for and
development of natural gas reserves in Arkansas for supply to its utility
customers. In 1971, the Company initiated an exploration and development program
outside Arkansas, unrelated to the utility requirements. Since that time, the
Company's exploration and development activities outside Arkansas have expanded.
The exploration, development and production activities are a separate, primary
business of the Company. The Company is an exempt holding company under the
Public Utility Holding Company Act of 1935.
Exploration and production activities consist of ownership of mineral
interests in productive and undeveloped leases located entirely within the
United States. The Company engages in gas and oil exploration and production
through its subsidiaries, SEECO, Inc. (SEECO) and Southwestern Energy Production
Company (SEPCO). SEECO operates exclusively in the state of Arkansas and holds a
large base of both developed and undeveloped gas reserves and conducts an
ongoing drilling program in the historically productive Arkansas section of the
Arkoma Basin. SEPCO conducts an exploration program in areas outside Arkansas,
primarily the Gulf Coast areas of Texas and Louisiana. SEPCO also holds a block
of leasehold acreage located on the Fort Chaffee military reservation in western
Arkansas and in other parts of Arkansas away from the operating areas of the
Company's other subsidiaries. The Company's subsidiary Arkansas Western Gas
Company (Arkansas Western) operates integrated natural gas distribution systems
in Arkansas and Missouri. Arkansas Western is the largest single purchaser of
SEECO's gas production. Southwestern Energy Pipeline Company (SWPL) owns an
interest in the NOARK Pipeline System (NOARK), an intrastate natural gas
transmission system which extends across northern Arkansas. A discussion of the
primary businesses conducted by the Company through its wholly owned
subsidiaries follows.
NATURAL GAS AND OIL EXPLORATION AND PRODUCTION
Substantially all of the Company's exploration and production activities and
reserves are concentrated in the Arkoma Basin of Arkansas and the Gulf Coast
areas of Texas and Louisiana. At December 31, 1994, the Company had proved
natural gas reserves of 316.1 billion cubic feet (Bcf) and proved oil reserves
of 1,231 thousand barrels (MBbls). Revenues of the exploration and production
subsidiaries are predominately generated from production of natural gas. The
Company's gas production increased for the seventh consecutive year in 1994,
totaling 37.7 Bcf, up 6% from 35.7 Bcf in 1993. Sales of gas production
accounted for 96% of total operating revenues for this segment in 1994, 98% in
1993, and 96% in 1992. SEECO's largest customer for sales of its gas production
was the Company's utility subsidiary. Sales to unaffiliated purchasers by both
SEECO and SEPCO have increased significantly, however, during the last few years
primarily as a result of higher production from Arkansas properties and from
properties in the Gulf Coast areas. Sales to unaffiliated purchasers accounted
for 63% of total gas volumes sold by the exploration and production segment in
1994, 64% in 1993, and 55% in 1992.
1
Gas volumes sold by SEECO to Arkansas Western for its northwest Arkansas
division (AWG) were approximately 8.8 Bcf in 1994, 7.1 Bcf in 1993 and 7.2 Bcf
in 1992. Through these sales, SEECO furnished approximately 64% of the northwest
Arkansas system's requirements in 1994 and 50% in both 1993 and 1992. The
increase in 1994 was due largely to increased storage injections and higher
volumes resulting from a settlement reached to resolve certain gas cost issues
before the Arkansas Public Service Commission (APSC). The settlement, which
involved the price of gas sold under a long-term contract between SEECO and AWG,
is hereafter referred to as "the gas cost settlement", and is discussed more
fully below. SEECO also delivered approximately 1.5 Bcf in 1994, 2.2 Bcf in 1993
and 2.8 Bcf in 1992 directly to certain large business customers of AWG through
a transportation service of the utility subsidiary that became effective in
October, 1991. Most of the sales to AWG are pursuant to a twenty-year contract
between SEECO and AWG entered into in July, 1978, under which the price had been
frozen since 1984. This contract was amended in 1994 as a result of the gas cost
settlement. The settlement became effective July 1, 1994, and calls for sales
under the contract to take place at a price which is equal to a spot market
index plus an additional premium. The settlement results in a lower contract
price based on current market conditions. That effect is offset in part by
provisions which allow additional volumes to be sold under the contract. The
amended contract provides for volumes equal to the historical level of sales
under the contract to be sold at the spot market index plus a premium of $.95
per Mcf, while any incremental sales volumes will receive a premium of $.50 per
Mcf. In 1994, approximately 8.1 Bcf (net to the Company's interest) was sold
under the contract compared to approximately 6.0 Bcf in 1993. Other significant
terms of the settlement prevent any of the parties thereto from asking for
refunds, transfer certain of AWG's storage facilities to SEECO, and prohibits
AWG from filing a rate case before January, 1996. In addition to this contract,
SEECO also sells gas to AWG under newer long-term contracts with flexible
pricing provisions and under short-term spot market arrangements. SEECO's sales
to AWG accounted for approximately 32%, 31% and 45% of total exploration and
production revenues in 1994, 1993 and 1992, respectively.
SEECO's sales to Associated Natural Gas Company (Associated), a division of
Arkansas Western which operates natural gas distribution systems in northeast
Arkansas and parts of Missouri, were 5.1 Bcf in 1994, 5.7 Bcf in 1993 and 4.3
Bcf in 1992. These deliveries accounted for approximately 58% of Associated's
total requirements in 1994, 67% in 1993 and 56% in 1992. These sales represented
14% of total exploration and production revenues in 1994, 15% in 1993 and 14% in
1992. Deliveries to Associated decreased in 1994 due to warmer weather in the
heating season and increased in 1993 primarily due to colder heating weather and
storage requirements during the summer months. Effective October, 1990, SEECO
entered into a ten-year contract with Associated to supply its base load system
requirements at a price to be redetermined annually. Deliveries under this
contract were made at a price of $1.90 per thousand cubic feet (Mcf) from
inception of the contract through the first nine months of 1993, increased to
$2.385 per Mcf for the contract period ended September 30, 1994, and are
currently being made at a price of $2.20 per Mcf.
In 1990, SEECO completed the initial mapping and engineering phases of a
multi-year geological field study of the Arkoma Basin of Arkansas. The product
developed was an extensive database and geologic interpretations of the
distribution of gas-bearing sands in the region and resulted in the
identification of 69.7 Bcf of proved undeveloped reserves that were added to the
Company's base of proved reserves. At December 31, 1994, after transfers and
revisions, the remaining proved undeveloped reserves identified by the study
were 46.4 Bcf. The data base developed is continually updated by drilling
activity and serves as the guide for a development drilling program that the
Company plans to continue over the next several years. The development drilling
program added 22.2 Bcf in 1994, 27.0 Bcf in 1993, and 22.5 Bcf in 1992 of new
natural gas reserve additions and resulted in the transfer of 3.0 Bcf in 1994,
2.6 Bcf in 1993, and 8.7 Bcf in 1992 from the proved undeveloped category to the
proved developed category. SEECO participated in a total of 97 development wells
during 1994 with a completion rate of 72%. SEECO expects the number of wells it
participates in to increase during 1995, but due to anticipated lower working
interests, expects the number
2
of wells net to the Company's interest to remain approximately the same as 1994.
SEECO's sales to unaffiliated purchasers increased to 10.7 Bcf in 1994, from
10.0 Bcf in 1993 and 4.7 Bcf in 1992. The increase in both years resulted from
the Company's development drilling program. At present, SEECO's contracts for
sales of gas to unaffiliated customers consist of short-term sales made to
customers of AWG's transportation program and spot sales into markets away from
AWG's distribution system. These sales are subject to seasonal price swings. In
the past, the Company's ability to enter into sales arrangements with
unaffiliated customers has generally been constrained by a lack of pipeline
transportation to markets away from the Arkoma Basin. Initiatives of the FERC to
restructure the natural gas interstate pipeline service rules through its Order
No. 636 series have improved and should continue to improve the Company's
ability to market its existing and potential reserves. Also contributing to the
increase in the ability of SEECO to market its gas to unaffiliated customers was
the completion in September, 1992 of NOARK, as explained more fully below under
"Natural gas gathering, transmission and distribution." SEECO's sales to
unaffiliated purchases accounted for approximately 23%, 22% and 13% of total
exploration and production revenues in 1994, 1993 and 1992, respectively.
At December 31, 1994, the gas reserves of SEPCO were located primarily in
the states of Arkansas, Oklahoma and the Gulf Coast areas of Texas and
Louisiana, while its oil reserves were located primarily in Oklahoma and the
Gulf Coast areas of Louisiana and Texas. SEPCO holds about 26% of the Company's
natural gas reserves and all of its oil reserves. SEPCO's gas sales increased to
13.1 Bcf in 1994, from 12.9 Bcf in 1993 and 9.6 Bcf in 1992. The increased
production since 1992 was primarily from properties located in the Gulf Coast
areas of Texas and Louisiana. The increase in 1994 was the result of the
completion of a production platform at the Galveston Block 283 gas field late in
1993 and first production from the Earl Chauvin No. 1 well, a 1993 discovery in
southeast Louisiana. The increase in 1993 was primarily the result of the
completion of a production platform at Brazos Block 397 and the start of
production in November 1993 from Galveston Block 283. The Company's production
from the Gulf Coast areas is sold under contracts which reflect current short-
term prices and which are subject to seasonal price swings. The Company
curtailed part of its gas production during 1992 when sales prices were deemed
below acceptable levels. Oil production was 200 MBbls in 1994, compared to 97
MBbls in 1993, and 120 MBbls in 1992. The increase in oil production in 1994
primarily resulted from the acquisition of certain Oklahoma producing properties
during the year. The Company's exploration program has been directed almost
exclusively toward natural gas in recent years. The Company plans to continue to
concentrate on developing gas reserves, but will also selectively seek
opportunities to participate in projects oriented toward oil production. Over
the long-term, however, oil sales are not expected to account for a significant
part of the Company's future revenues. SEPCO's gas and oil sales accounted for
approximately 33% of total exploration and production operating revenues in 1994
and 1993, and 31% in 1992.
In 1989, SEPCO purchased at oral auction 11,000 undrilled acres containing
17 separate drilling units on the Fort Chaffee military reservation of western
Arkansas. The total cost of this acreage was approximately $11.0 million. To
date, the Company has drilled or participated in eight wells at Fort Chaffee
that have discovered an estimated 47.0 Bcf of new gas reserves, net to the
Company's interest. The Company is currently in the process of testing a well
recently drilled at Fort Chaffee. Sales of gas production from Fort Chaffee
totaled 4.3 Bcf in 1994, 5.1 Bcf in 1993 and 5.8 Bcf in 1992. The decrease is a
result of the natural decline in the productive capability of these properties.
Conflicts with military training activities have limited SEPCO's drilling
operations at Fort Chaffee. The Company has attempted to work with the military
to improve work schedules and operating restrictions, but those efforts have
been to little avail even though the base was scheduled for closing. As a
result, Fort Chaffee will probably play a lesser role in the Company's plans.
From late 1992 through 1993 sales from Fort Chaffee took place under a firm
sales contract for 25 million cubic feet per day (MMcfd) to an independent
marketer. The gas was transported by the marketer
3
under a firm transportation contract on NOARK. The Company met its obligation
under the firm sales contract in part by providing gas supplied from SEECO's
development drilling program. In late 1993, the marketer filed suit against
NOARK, the Company and certain of its affiliates, seeking rescission of the firm
sales and transportation contracts. Since that time, the Company has entered
into its own sales arrangements covering the affected gas production. This gas
production continues to be transported through NOARK at a price based on current
spot market prices, net of transportation. See discussion at "Natural gas
gathering, transmission and distribution" for additional information concerning
the independent marketer's decision to cease honoring its contractual
obligations.
Outside Arkansas, the Company added 8.7 Bcf of new reserves in 1994 and 19.0
Bcf in 1993 from drilling. Of that total, 8.5 Bcf in 1994 and 15.2 Bcf in 1993
was from discoveries in the coastal areas of Texas and Louisiana. The Gulf Coast
region continues to be the focus of most of the Company's exploration activity
outside Arkansas. The Company expects in the future to continue to direct its
exploration activities toward the onshore Gulf Coast.
During 1994, the Company increased its emphasis on acquisitions of producing
properties and expects that effort to continue as a supplement to its
exploration and development drilling programs. The Company acquired
approximately 20.6 Bcf of gas and 1,038 MBbls of oil during 1994, mostly in the
Anadarko Basin of Oklahoma.
In the natural gas and oil exploration segment, competition is encountered
primarily in obtaining leaseholds for future exploration. Competition in the
state of Arkansas has increased in recent years, due largely to the development
of improved access to interstate pipelines. Due to the Company's significant
leasehold acreage position in Arkansas and its long-time presence and reputation
in this area, the Company believes it will continue to be successful in
acquiring new leases in Arkansas. While improved intrastate and interstate
pipeline transportation in Arkansas should increase the Company's access to
markets for its gas production, these markets will generally be served by a
number of other suppliers. Thus, the Company will encounter competition which
may affect both the price it receives and contract terms it must offer. Outside
Arkansas, the Company is less well-established and faces competition from a
larger number of other producers. The Company has in recent years been
successful in building its inventory of undeveloped leases and obtaining
participating interests in drilling prospects outside Arkansas.
The Company expects its 1995 capital expenditures for gas and oil
exploration and development to total $55.2 million, approximately equal to the
$55.4 million incurred in 1994. Most of the capital spending will be directed to
the continued development of the Company's proved acreage in the Arkoma Basin
and the Company's exploration program in the Gulf Coast areas of Texas and
Louisiana. The Company will review this budget periodically during the year for
possible adjustment depending upon cash flow projections related to fluctuating
prices for oil and natural gas.
NATURAL GAS GATHERING, TRANSMISSION AND DISTRIBUTION
The Company's natural gas distribution operations are concentrated primarily
in north Arkansas and southeast Missouri. The Company serves approximately
164,000 retail customers and obtains a substantial portion of the gas they
consume through its Arkoma Basin gathering facilities. The Company is also a
participant in a partnership that owns the NOARK Pipeline System. The complexity
of AWG's distribution operations, particularly its gathering system in the
Arkoma Basin gas fields, increased significantly with the start up of NOARK. AWG
provides field management services to NOARK under a contract with the
partnership and AWG's gathering system delivers to NOARK a substantial part of
the gas NOARK transports. The Company completed a pipeline in 1993 that connects
NOARK to Associated's distribution system, tying together the Company's two
primary gas distribution systems.
4
Arkansas Western consists of two operating divisions. The AWG division
gathers natural gas in the Arkansas River Valley of western Arkansas and
transports the gas through its own transmission and distribution systems,
ultimately delivering it at retail to approximately 97,000 customers in
northwest Arkansas. The Associated division currently receives its gas from
transportation pipelines and delivers the gas through its own transmission and
distribution systems, ultimately delivering it at retail to approximately 67,000
customers primarily in northeast Arkansas and southeast Missouri. Associated,
formerly a wholly owned subsidiary of Arkansas Power and Light Company, was
acquired and merged into Arkansas Western, effective June 1, 1988. The Arkansas
Public Service Commission (APSC) and the Missouri Public Service Commission
(Missouri Commission) regulate the Company's utility rates and operations. In
Arkansas, the Company operates through municipal franchises which are perpetual
by state law. These franchises, however, are not exclusive within a geographic
area. In Missouri, the Company operates through municipal franchises with
various terms of existence.
AWG and Associated deliver natural gas to residential, commercial and
industrial customers. The industrial customers are generally smaller concerns
using gas for plant heating or product processing. AWG has no restriction on
adding new residential or commercial customers and will supply new industrial
customers which are compatible with the scale of its facilities. AWG has never
denied service to new customers within its service area or experienced
curtailments because of supply constraints. Associated has not denied service to
new customers within its service area or experienced curtailments because of
supply constraints since the acquisition date, although service restrictions and
supply related curtailments did occur prior to that time. Curtailment of large
industrial customers of AWG and Associated occurs only infrequently when
extremely cold weather requires their systems to be dedicated exclusively to
human needs customers.
AWG and Associated have experienced a general trend in recent years toward
lower rates of usage among their customers, largely as a result of conservation
efforts which the Company encourages. Competition is increasingly being
experienced from alternative fuels, primarily electricity, fuel oil and propane.
A significant amount of fuel switching has not been experienced, though, as
natural gas is generally the least expensive, most readily available fuel in the
service territories of AWG and Associated.
The competition from alternative fuels and, in a limited number of cases,
alternative sources of natural gas has intensified in recent years as a result
of the significant declines in prices of petroleum products and the
deliverability surplus of natural gas experienced in the recent past. Industrial
customers are most likely to consider utilization of these alternatives, as they
are less readily available to commercial and residential customers. In an effort
to provide some pricing alternatives to its large industrial customers with
relatively stable loads, AWG offers an optional tariff to its larger business
customers and to any other large business customer which shows that it has an
alternate source of fuel at a lower price or that one of its direct competitors
in another area has access to cheaper sources of energy. This optional tariff
enables those customers willing to accept the risk of price and supply
volatility to direct AWG to obtain a certain percentage of their gas
requirements in the spot market. Participating customers continue to pay the
nongas costs of service included in AWG's present tariff for large business
customers and agree to reimburse AWG for any take-or-pay liability caused by
spot market purchases on the customer's behalf. In an effort to more fully meet
the service needs of larger business customers, both AWG and Associated
instituted a transportation service in October, 1991, that allows such customers
in Arkansas to obtain their own gas supplies directly from other suppliers.
Associated has offered transportation service to its larger customers in
Missouri for several years and AWG's spot market purchasing program has provided
customers in northwest Arkansas with many of the benefits of transportation
service. Under the programs, transportation service is available in Arkansas to
any large business customer which consumes a minimum of 150,000 Mcf per year and
no less than 3,000 Mcf per month. Transportation service is available in
Missouri to any customer whose average monthly usage exceeds 2,000 Mcf. The
minimums can be met by aggregating facilities under common ownership. A total of
eleven customers are currently using the Arkansas
5
transportation service, including three of AWG's four largest customers in
northwest Arkansas and Associated's two largest customers in northeast Arkansas.
In its 1991 order approving the transportation program, the APSC indicated that
the program's approval would be on a one year trial basis to allow for time to
gain operating experience in an effort to make improvements, if needed, in the
program. Since the expiration of the first trial year, the APSC has continued to
extend the program on an annual basis. The APSC has established a procedural
schedule for considering during 1995 finalization of the transportation program.
In addition, the public hearing will also address whether there is a need to
continue AWG's spot market purchasing program. Other issues may also be raised
by the parties to the proceeding.
AWG purchases its system gas supply directly at the wellhead under long-term
contracts. Purchases are made from approximately 300 working interest owners in
491 producing wells. As previously indicated, SEECO furnished approximately 64%
of AWG's requirements in 1994 and 50% in both 1993 and 1992. A significant
portion of the unaffiliated volumes purchased by AWG are covered by contracts
which contain provisions for periodic or automatic escalation in the price to be
paid. In the mid-1980's, however, AWG took steps to freeze the prices paid under
those contracts containing indefinite price escalators tied to Section 102 or
prices escalating under Section 103 of the NGPA. Producers under these contracts
were offered an amendment freezing the price at the December, 1984 level, with a
right to renegotiate in one year. AWG received acceptances from producers
holding the majority of the reserves under such contracts, either accepting the
amendment or agreeing to freeze the price. Since that time, the price freeze has
remained in effect and AWG has continued to make payments at the frozen 1984
price levels. This price freeze also applied to purchases from SEECO under its
long-term contract with AWG until the gas cost settlement became effective July
1, 1994. A significant portion of AWG's supply comes from newer, market
responsive, long-term contracts which take advantage of the lower prices
presently available from gas suppliers.
At December 31, 1994, AWG had a gas supply available to its northwest
Arkansas system of approximately 239 Bcf of proved developed reserves, equal to
17 times current annual usage. Of this total, approximately 113 Bcf were net
reserves available from SEECO. Under the terms of the gas cost settlement,
SEECO's reserves are no longer dedicated to AWG. However, a portion of these
reserves are utilized to meet the annual sales volume commitment of 9.0 Bcf
(gross) under the amended long-term contract with AWG. For purposes of
determining AWG's available gas supply, deliveries to AWG's spot market
purchasing program or transportation customers and the reserves related to those
deliveries are not considered.
During 1993, Associated renegotiated its purchase contracts with interstate
pipelines in accordance with the pipeline restructuring as mandated by the
Federal Energy Regulatory Commission's (FERC) Order No. 636. Prior to Order 636,
Associated purchased its system supply from six interstate pipelines, SEECO and
various spot market suppliers. Associated now purchases gas for its system
supply from unaffiliated suppliers in the producing fields accessed by
interstate pipelines and from SEECO. Purchases from SEECO are under a ten-year
contract with annual price redeterminations. Purchases from unaffiliated
suppliers are under firm contracts with terms between one and three years. The
rates charged by these suppliers include demand components to ensure
availability of gas supply, administrative fees and a commodity component which
is based on spot market gas prices. Associated's gas purchases are transported
through nine pipelines. The pipeline transportation rates include demand charges
to reserve pipeline capacity and commodity charges based on volumes transported.
Associated has also contracted with five of the interstate pipelines for storage
capacity to meet its peak seasonal demands. These contracts involve demand
charges based on the maximum deliverability, capacity charges based on the
maximum storage quantity, and charges for the quantities injected and withdrawn.
Over the past several years changes at the federal level have brought
significant changes to the regulatory structure governing interstate sales and
transportation of natural gas. The FERC's Order No. 636 series
6
changed a major portion of the gas acquisition merchant function provided to gas
distributors by interstate pipelines. AWG already obtains its supply at the
wellhead directly from producers and has not been directly impacted by Order No.
636. Associated has acquired the bulk of its gas supply at the wellhead since
its acquisition by AWG, but continued until Order No. 636 to purchase a portion
of both its peak and base requirements from interstate suppliers. The changes
mandated by Order No. 636 have placed the responsibility for arranging firm
supplies of natural gas directly on local distribution companies and have, as a
result, lessened the ability of Associated to purchase gas on the short-term
spot market.
As a result of pipeline deregulation, Associated has paid approximately $3.2
million in contract reformation costs and take-or-pay costs and $1.9 million in
transition costs which its interstate pipeline suppliers incurred and were
allowed to recover. The Company anticipates full recovery of the $1.9 million in
transition costs incurred. To date, the Company has recovered, subject to
refund, approximately $1.6 million of the contract reformation costs and take-
or-pay costs from its utility sales customers in the state of Missouri. Of the
unrecovered $1.6 million related to contract reformation costs and take-or-pay
costs, $.7 million is applicable to Associated's transportation customers in the
state of Missouri and $.9 million is applicable to all customers in the state of
Arkansas. The Staff of the Missouri Commission (Staff) has reviewed these
payments and made a recommendation that the unrecovered $.7 million related to
Associated's transportation customers should be disallowed on the grounds that
such recovery would constitute retroactive ratemaking. The Company disagreed
with this recommendation and a hearing was held on January 31, 1995. The Company
is awaiting the Missouri Commission's order.
AWG also purchases gas from unaffiliated producers under take-or-pay
contracts. Currently, the Company believes that it does not have a significant
exposure to liabilities resulting from these contracts, although the Company's
exposure to take-or-pay liabilities to its gas suppliers has increased in recent
years as a result of a decline in its gas purchase requirements. This decline
occurred because some of its large business customers converted to the
transportation service offered by AWG and Associated and began to obtain their
own gas supplies directly from other sources. The Company expects to be able to
continue to satisfactorily manage its exposure to take-or-pay liabilities.
As discussed earlier, Associated purchases a portion of its gas supply at
the wellhead from one of the Company's gas producing subsidiaries under a long-
term firm contract entered into in October, 1990. As a result of recent gas cost
audits in Missouri for the two-year period ended August 31, 1992, the Staff
recommended disallowance of approximately $3.1 million in gas costs incurred
under this contract. This amount represents the difference between the price
paid by Associated and a spot market index price for gas delivered into an
interstate pipeline operating in the Arkoma Basin. The price paid by Associated
under the contract was $1.90 per Mcf during the period in question. In making
its recommendation, the Staff acknowledged that Associated had lowered its gas
cost and saved its ratepayers money by purchasing gas from its affiliate. The
Staff also acknowledged that the appropriate price for purchases made under this
long-term firm contract should include a premium over the spot market price.
However, a Staff consultant testified that there was insufficient data upon
which to determine an appropriate premium over a spot market index for pricing
purchases under this contract and that he was unable to determine what the
appropriate premium should be. A hearing was held on January 31, 1995. The
Company presented testimony to demonstrate that the price paid under the
contract was at or below the market price for contracts with similar terms
during the period in which the purchases were made. The APSC previously reviewed
the costs charged to Arkansas ratepayers under this contract and found them to
be proper and allowable for recovery. The Missouri Commission has not yet issued
an order in this proceeding. The Staff has also audited Associated's gas
purchases for the period from September, 1992 through August, 1993 and
recommended no changes to the gas costs for that period.
The gas heating load is one of the most significant uses of natural gas and
is sensitive to outside temperatures. Sales, therefore, vary throughout the
year. Profits, however, have become less sensitive to
7
fluctuations in temperature in recent years as the structure of the Company's
utility rates has become somewhat flatter; i.e., most recovery of return on rate
base is built into a customer charge and the first step of its rates.
Gas distribution revenues in future years will be impacted by both customer
growth and rate increases allowed by regulatory commissions. In recent years,
AWG has experienced customer growth of approximately 3.5% to 4.0% annually,
while Associated has experienced customer growth of 1% to 2% annually. Based on
current economic conditions in the Company's service territories, the Company
expects this trend in customer growth to continue. AWG and Associated pass along
to customers through an automatic cost of gas adjustment clause any increase or
decrease experienced in purchased gas costs. As previously mentioned, the APSC
and the Missouri Commission regulate the Company's utility rates and operations.
Late in 1990, the APSC and the Missouri Commission approved rate increases for
the Company totaling $7.4 million annually. AWG received an increase of $5.7
million annually and Associated was awarded an increase of $.9 million annually
for its Missouri properties and $.8 million annually for its system in Arkansas.
Rate increase requests which may be filed in the future will depend upon
customer growth, increases in operating expenses, and additional investments in
property, plant and equipment. AWG is precluded from filing an application for a
rate increase with the APSC prior to January 1, 1996, as a result of the gas
cost settlement. The Company anticipates filing a rate increase request for AWG
in early 1996 and will continue to monitor the status of returns on the systems
operated by Associated and file rate cases as the need arises. AWG's rates for
gas delivered to its customers are not regulated by the FERC, but its
transmission and gathering pipeline systems are subject to the FERC's
regulations concerning open access transportation since AWG accepted a blanket
transportation certificate in connection with its merger with Associated.
NOARK is an intrastate pipeline constructed by a limited partnership in
which SWPL holds a 47.93% general partnership interest and is the pipeline's
operator. NOARK's main line was completed and placed in service in September,
1992. A lateral line of NOARK that allows the Company's gas distribution segment
to augment its supply to an existing market as well as supply gas to new markets
was completed and placed in service in November, 1992. The 258 mile long
pipeline originates near the Fort Chaffee military reservation in western
Arkansas and terminates in northeast Arkansas. NOARK interconnects with three
major interstate pipelines and provides additional access to markets for gas
production of both the Company and other producers. Construction of an eight-
mile interstate pipeline connecting NOARK to the distribution system of
Associated was completed during 1993. NOARK is a public utility regulated by the
APSC. The APSC established NOARK's maximum transportation rate based on its
original construction cost estimate of approximately $73.0 million. Due to
construction problems and the addition of a compressor station, the ultimate
costs of the pipeline exceeded the original estimate by approximately $30
million. NOARK has a capacity of 141 MMcfd. In 1994, NOARK had an average daily
throughput of 82 MMcfd, compared to 79 MMcfd in 1993, its first full year of
operation. Arkansas Western has contracted for 41 MMcfd of firm capacity on
NOARK under a ten-year transportation contract. NOARK also has a five-year
transportation contract with an independent marketer to transport 50 MMcfd
through NOARK on a firm basis. The Company's exploration and production segment
was supplying 25 MMcfd of the volumes transported by the marketer under that
agreement. In late 1993, the gas marketing company filed suit against NOARK, the
Company and certain of its affiliates, and, effective January 1, 1994, ceased
transporting gas under its agreement with NOARK. The complaint and subsequent
filings seek rescission of the transportation contract and a contract to
purchase gas from the Company's affiliates, and actual and punitive damages. The
Company and NOARK both believe the suit is without merit and have filed
counterclaims seeking enforcement of the contracts and damages. The Company is
currently making its own sales arrangements and transporting production through
NOARK which was previously purchased by the marketer.
8
As a result of the developments described above, NOARK is currently
incurring losses and the Company expects further losses from its equity
investment in NOARK until the pipeline is able to increase its level of
throughput and until improvement occurs in the competitive conditions which
determine the transportation rates NOARK can charge. NOARK provides additional
pipeline capacity to a portion of the Arkoma Basin in Arkansas which was not
previously adequately served by pipelines offering firm transportation. NOARK
competes primarily with two interstate pipelines in its gathering area. One of
those elected to become an open access transporter subsequent to NOARK's start
of construction. That pipeline, which was recently sold, has not offered firm
transportation, but the increased availability of interruptible transportation
service has intensified the competitive environment within which NOARK operates.
The Company and the other partners of NOARK are currently investigating options
which could improve NOARK's future financial prospects.
The Company is subject to laws and regulations relating to the protection of
the environment. The Company's policy is to accrue environmental and cleanup
related costs of a non-capital nature when it is both probable that a liability
has been incurred and when the amount can be reasonably estimated. The Company
has no material amounts accrued at December 31, 1994. Additionally, management
believes any future remediation or other compliance related costs will not have
any material effect upon capital expenditures, earnings or the competitive
position of the Company's subsidiaries in the segments in which they operate.
REAL ESTATE DEVELOPMENT
A. W. Realty Company (AWR) owns an interest in approximately 170 acres of
real estate, most of which is undeveloped. AWR's real estate development
activities are concentrated on a 130-acre tract of land located near the
Company's headquarters in a growing part of Fayetteville, Arkansas. The Company
has owned an interest in this land for many years. The property is zoned for
commercial, office and multi-family residential development. AWR continues to
review with a joint venture partner various options for developing this property
which would minimize the Company's initial capital expenditures but still enable
it to retain an interest in any appreciation in value. This activity, however,
does not represent a significant portion of the Company's business.
EMPLOYEES
At December 31, 1994, the Company had 661 employees, 89 of whom are
represented under a collective bargaining agreement.
INDUSTRY SEGMENT AND STATISTICAL INFORMATION
The following portions of the 1994 Annual Report to Shareholders (filed as
Exhibit 13 to this filing) are hereby incorporated by reference for the purpose
of providing additional information about its business. Refer to Note 9 to the
financial statements for information about industry segments and "Financial and
Operating Statistics" for additional statistical information, including the
average sales price per unit of gas produced and of oil produced and the average
production cost per unit.
ITEM 2. PROPERTIES
The portions of the 1994 Annual Report to Shareholders (filed as Exhibit 13
to this filing) listed below are hereby incorporated by reference for the
purpose of describing its properties.
Refer to the Appendix for information concerning areas of operation of the
Company's gas distribution systems. For information concerning the Company's
exploration and production areas of operation, also refer to the Appendix. See
the table entitled "Operating Properties" at the Appendix for information
concerning miles of pipe of the Company's gas distribution systems and for
information regarding leasehold acreage and producing wells by geographic region
of the Company's exploration and production segment. Also, see Notes 5 and 6 to
the financial statements for additional information about the Company's gas and
oil operations.
9
For information concerning capital expenditures, refer to the "Capital
Expenditures" section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations". Also refer to "Financial and Operating
Statistics" for information concerning gas and oil wells drilled and gas and oil
produced.
The following information is provided to supplement that presented in the
1994 Annual Report to Shareholders:
NET WELLS DRILLED DURING THE YEAR
EXPLORATORY
PRODUCTIVE
YEAR WELLS DRY HOLES TOTAL
---- ---------- --------- -----
1994........ 4.7 1.8 6.5
1993........ 2.8 4.0 6.8
1992........ 1.2 6.1 7.3
DEVELOPMENT
PRODUCTIVE
YEAR WELLS DRY HOLES TOTAL
---- ---------- --------- -----
1994........ 45.5 14.7 60.2
1993........ 37.9 10.5 48.4
1992........ 53.4 13.4 66.8
WELLS IN PROGRESS AS OF DECEMBER 31, 1994
TYPE OF WELL GROSS NET
------------ ----- ---
Exploratory.................... 2.0 .5
Development.................... 6.0 1.6
----- -----
Total.......................... 8.0 2.1
===== =====
Due to the insignificance of the Company's oil reserves and producing oil
wells to its total reserves and producing wells, separate disclosure of gas and
oil producing wells has not been made.
No individually significant discovery or other major favorable or adverse
event has occurred since December 31, 1994.
During 1994, SEECO and SEPCO were required to file Form 23, "Annual Survey
of Domestic Oil and Gas Reserves" with the Department of Energy. The basis for
reporting reserves on Form 23 is not comparable to the reserve data included in
Note 6 to the financial statements in the 1994 Annual Report to Shareholders.
The primary differences are that Form 23 reports gross reserves, including the
royalty owners' share and includes reserves for only those properties where
either SEECO or SEPCO is the operator.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various legal proceedings
arising in the ordinary course of business. While the outcome of lawsuits or
other proceedings cannot be predicted with certainty, management expects these
matters will not have a material adverse effect on the consolidated financial
position or results of operations of the Company.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
ended December 31, 1994, to a vote of security holders, through the
solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is information with regard to executive officers of the
Company:
NAME OFFICER POSITION AGE
---- ---------------- ---
Charles E. Scharlau ........ Chairman of the Board (since 1979),
Southwestern Energy Company and 68
Subsidiaries,and Chief Executive
Officer (since 1968), Southwestern
Energy Company.
Dan B. Grubb ............... President and Chief Operating 59
Officer(since 1992), Director
(1988-1992), Southwestern Energy
Company.Chairman and Chief Executive
Officer of Grubb Industries, Inc.,and
Investor and Business Consultant
(since 1988). Previously, President
and Chief Operating Officer, Midcon
Corporation (since 1987).
Stanley D. Green ........... Executive Vice President - Finance 41
and Corporate Development
(since 1992), and Chief Financial
Officer (since 1987), Vice President
- Treasurer and Secretary
(since 1987), Controller (since 1981),
Southwestern Energy Company and
Subsidiaries.
B. Brick Robinson .......... Executive Vice President and Chief 64
Operating Officer (since 1988),
Southwestern Energy Production
Company and SEECO, Inc. (subsidiaries
of Southwestern Energy Company).
Previously, various positions
with Occidental Petroleum Corporation
and its subsidiaries, including Vice
President, Far East and Domestic
Frontier Exploration,Occidental
International (since 1985).
Gregory D. Kerley .......... Vice President - Treasurer and 39
Secretary (since 1992), and Chief
Accounting Officer (since 1990),
Controller (since 1990), Southwestern
Energy Company and Subsidiaries.
Previously, Treasurer and Controller,
Agate Petroleum, Inc. (since 1984).
All officers are elected at the Annual Meeting of the Board of Directors for
one-year terms or until their successors are duly elected. There are no
arrangements between any officer and any other person pursuant to which he was
selected as an officer. There is no family relationship between any of the named
executive officers or between any of them and the Company's directors.
Information concerning compliance with Section 16(a) of the Securities Exchange
Act of 1934, as amended, is presented in the definitive Proxy Statement dated
April 21, 1995, under the section entitled "Security Ownership of Directors,
Nominees and Executive Officers" and is incorporated herein by reference.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The "Shareholder Information" and "Financial and Operating Statistics"
sections of the 1994 Annual Report to Shareholders (filed as Exhibit 13 to this
filing) are hereby incorporated by reference for information concerning the
market for and prices of the Company's common stock, the number of shareholders
and cash dividends paid.
The terms of the Company's long-term debt instruments and agreements impose
restrictions on the payment of cash dividends. At December 31, 1994,
$121,754,000 of retained earnings was available for payment as cash dividends.
These covenants generally limit the payment of dividends in a fiscal year to the
total of net income earned since January 1, 1990, plus $20,000,000 less
dividends paid and purchases, redemptions or retirements of capital stock during
the period since December 4, 1991.
The Board of Directors increased the quarterly dividend by 20% in the third
quarter of 1993, to $.06 per share, equal to an annual rate of $.24 per share
(after the effect of a three-for-one stock split distributed August 5, 1993).
While the Board of Directors intends to continue the practice of paying
dividends quarterly, amounts and dates of such dividends as may be declared will
necessarily be dependent upon the Company's future earnings and capital
requirements.
ITEM 6. SELECTED FINANCIAL DATA, AND
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, AND
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following portions of the 1994 Annual Report to Shareholders (filed as
Exhibit 13 to this filing) are hereby incorporated by reference.
"Financial and Operating Statistics" for selected financial data of the
Company.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The consolidated financial statements as detailed in Item 14 (a)(1) below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The definitive Proxy Statement to holders of the Company's Common Stock in
connection with the solicitation of proxies to be used in voting at the Annual
Meeting of Shareholders on May 31, 1995 (the 1995 Proxy Statement), is hereby
incorporated by reference for the purpose of providing information about the
identification of directors. Refer to the sections "Election of Directors" and
"Security Ownership of Directors, Nominees and Executive Officers" for
information concerning the directors.
Information concerning executive officers is presented in Part I, Item 4 of
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The 1995 Proxy Statement is hereby incorporated by reference for the purpose
of providing information about executive compensation. Refer to the section
"Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The 1995 Proxy Statement is hereby incorporated by reference for the purpose
of providing information about security ownership of certain beneficial owners
and management. Refer to the section "Security Ownership
12
of Directors, Nominees and Executive Officers" for information about security
ownership of certain beneficial owners and management.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The 1995 Proxy Statement is hereby incorporated by reference for the purpose
of providing information about related transactions. Refer to the section
"Security Ownership of Directors, Nominees and Executive Officers" and
"Compensation Committee Interlocks and Insider Participation" for information
about transactions with members of the Company's Board of Directors.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of the Company and
its subsidiaries, included with its 1994 Annual Report to Shareholders (filed as
Exhibit 13 to this filing) and the report of independent auditors on such report
are hereby incorporated by reference:
Report of Independent Auditors.
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Statements of Income for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended December
31, 1994, 1993 and 1992.
Consolidated Statements of Retained Earnings for the years ended
December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements, December 31, 1994, 1993
and 1992.
(2) The consolidated financial statement schedules have been omitted
because they are not required under the related instructions, or are
inapplicable and therefore have been omitted.
(3) The exhibits listed on the accompanying Exhibit Index (pages 15-17)
are filed as part of, or incorporated by reference into, this Report.
(b) Reports on Form 8-K:
A Current Report on Form 8-K was filed on November 8, 1994,
regarding a news release dated October 31, 1994, announcing that two
of the Company's wholly owned subsidiaries entered into a settlement
with the Staff of the Arkansas Public Service Commission (APSC) and
the Attorney General of the State of Arkansas regarding certain gas
cost issues which had been outstanding before the APSC for almost four
years. The issues in question involved the price of gas sold by one of
the Company's gas producing subsidiaries under a long-term contract
with the Company's utility subsidiary. Under the settlement, the price
paid by the Company's utility subsidiary will be referenced to an
index plus a premium. At current market prices, the new provision will
result in a reduced sales price under the contract. The terms of the
settlement became effective as of July 1, 1994, and were approved by
the APSC on January 5, 1995. The settlement is discussed in more
detail on page 2 in the "Natural gas and oil exploration and
production" section of Item 1.
A Current Report on Form 8-K was filed on March 10, 1995,
regarding a news release dated February 23, 1995, announcing that the
Company's Board of Directors authorized the Company to repurchase up
to $30.0 million of the Company's common shares. The Company plans to
buy the shares from time to time, depending on market conditions, in
the open market or in private negotiated transactions. Shares
repurchased will be held in treasury and may be used for general
corporate purposes, including issuance under option plans. The
repurchase program will continue until terminated by the Company's
Board of Directors.
13
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THE REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SOUTHWESTERN ENERGY COMPANY
---------------------------
(Registrant)
Dated: March 24, 1995 BY: /s/STANLEY D.GREEN
----------------------------
Stanley D. Green,
Executive Vice President -
Finance and Corporate
Development, and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 24, 1995.
/s/ CHARLES E. SCHARLAU Director, Chairman, and
-------------------------------
Charles E. Scharlau Chief Executive Officer
Executive Vice President -
/s/ STANLEY D. GREEN Finance and Corporate Development,
-------------------------------
Stanley D. Green and Chief Financial Officer
Vice President - Treasurer
/s/ GREGORY D. KERLEY and Secretary, and
-------------------------------
Gregory D. Kerley Chief Accounting Officer
/s/ E. J. BALL Director
-------------------------------
E. J. Ball
/s/ JAMES B. COFFMAN Director
-------------------------------
James B. Coffman
/s/ JOHN PAUL HAMMERSCHMIDT Director
-------------------------------
John Paul Hammerschmidt
/s/ CHARLES E. SANDERS Director
-------------------------------
Charles E. Sanders
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
Not Applicable
14
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
3. Articles of Incorporation and Bylaws of the Company (amended and restated
Articles of Incorporation incorporated by reference to Exhibit 3 to Annual
Report on Form 10-K for the year ended December 31, 1993); Bylaws of the
Company, as amended (filed herewith).
4. Shareholder Rights Agreement, dated May 5, 1989 (incorporated by reference
to Exhibit 1 filed with the Company's Form 8-K on May 10, 1989).
Material Contracts:
10.1 Gas Purchase Contract between SEECO, Inc., and Arkansas Western Gas
Company, dated July 24, 1978, as amended May 21, 1979, and Amended and
Restated as of July 1, 1994 (filed herewith).
10.2 Agreement between Southwestern Energy Company, Arkansas Western Gas
Company, Arkansas Power & Light Company and Associated Natural Gas
Company, dated September 1, 1987, as amended February 22, 1988, and May
16, 1988 (original agreement and first amendment to the Agreement
incorporated by reference to Exhibit 10 to Annual Report on Form 10-K for
the year ended December 31, 1987; second amendment to the Agreement
thereto incorporated by reference to Exhibit 10 to Annual Report on Form
10-K for the year ended December 31, 1988).
10.3 Gas Purchase Contract between SEECO, Inc. and Associated Natural Gas
Company, dated October 1, 1990 (incorporated by reference to Exhibit 10 to
Annual Report on Form 10-K for the year ended December 31, 1990).
10.4 Compensation Plans:
(a) Summary of Southwestern Energy Company Annual and Long-Term
Incentive Compensation Plan, effective January 1, 1985, as amended
July 10, 1989 (Replaced by Southwestern Energy Company Incentive
Compensation Plan, effective January 1, 1993) (original plan
incorporated by reference to Exhibit 10 to Annual Report on Form 10-
K for the year ended December 31, 1984; first amendment thereto
incorporated by reference to Exhibit 10 to Annual Report on Form 10-
K for the year ended December 31, 1989).
(b) Summary of Southwestern Energy Company Incentive Compensation Plan,
effective January 1, 1993 (incorporated by reference to Exhibit
10.4(b) to Annual Report on Form 10-K for the year ended December
31, 1993).
(c) Nonqualified Stock Option Plan, effective February 22, 1985, as
amended July 10, 1989 (Replaced by Southwestern Energy Company 1993
Stock Incentive Plan, dated April 7, 1993) (original plan
incorporated by reference to Exhibit 10 to Annual Report on Form 10-
K for the year ended December 31, 1985; amended plan incorporated by
reference to Exhibit 10 to Annual Report on Form 10-K for the year
ended December 31, 1989).
(d) Southwestern Energy Company 1993 Stock Incentive Plan, dated April
7, 1993 (incorporated by reference to the appendix filed with the
Company's definitive Proxy Statement to holders of the Registrant's
Common Stock in connection with the solicitation of proxies to be
used in voting at the Annual Meeting of Shareholders on May 26,
1993).
15
EXHIBIT
NO. DESCRIPTION
------- -----------
(e) Southwestern Energy Company 1993 Stock Incentive Plan for Outside
Directors, dated April 7, 1993 (incorporated by reference to the
appendix filed with the Company's definitive Proxy Statement to
holders of the Registrant's Common Stock in connection with the
solicitation of proxies to be used in voting at the Annual Meeting
of Shareholders on May 26, 1993).
10.5 Southwestern Energy Company Supplemental Retirement Plan, adopted May 31,
1989, and Amended and Restated as of December 15, 1993 (amended and
restated plan incorporated by reference to Exhibit 10.5 to Annual Report
on Form 10-K for the year ended December 31, 1993).
10.6 Southwestern Energy Company Supplemental Retirement Plan Trust, dated
December 30, 1993 (incorporated by reference to Exhibit 10.6 to Annual
Report on Form 10-K for the year ended December 31, 1993).
10.7 Executive Severance Agreement for Charles E. Scharlau, effective August 4,
1989 (incorporated by reference to Exhibit 10 to Annual Report on Form 10-
K for the year ended December 31, 1989).
10.8 Executive Severance Agreement for Stanley D. Green, effective August 4,
1989 (incorporated by reference to Exhibit 10 to Annual Report on Form 10-
K for the year ended December 31, 1989).
10.9 Executive Severance Agreement for B. Brick Robinson, effective August 4,
1989 (incorporated by reference to Exhibit 10 to Annual Report on Form 10-
K for the year ended December 31, 1989).
10.10 Executive Severance Agreement for Dan B. Grubb, effective July 8, 1992
(incorporated by reference to Exhibit 10.13 to Annual Report on Form 10-K
for the year ended December 31, 1992).
10.11 Executive Severance Agreement for Gregory D. Kerley, effective December
14, 1994 (filed herewith).
10.12 Employment Agreement for Charles E. Scharlau, dated December 18, 1990,
effective January 1, 1991, as amended December 7, 1994 (original agreement
incorporated by reference to Exhibit 10 to Annual Report on Form 10-K for
the year ended December 31, 1990; amendment filed herewith).
10.13 Employment Agreement for Dan B. Grubb, effective July 8, 1992
(incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K
for the year ended December 31, 1992).
10.14 Form of Indemnity Agreement, between the Company and each officer and
director of the Company, dated May 25, 1988 or October 9, 1991
(incorporated by reference to Exhibit 10 to Annual Report on Form 10-K for
the year ended December 31, 1988; and incorporated by reference to Exhibit
10.20 to Annual Report on Form 10-K for the year ended December 31, 1991).
10.15 Gas Transportation Agreement between NOARK Pipeline System, Limited
Partnership and Arkansas Western Gas Company, dated February 4, 1991, and
amended February 14, 1992 (original agreement incorporated by reference to
Exhibit 10.22 to Annual Report on Form 10-K for the year ended December
31, 1991; amended agreement incorporated by reference to Exhibit 10.19 to
Annual Report on Form 10-K for the year ended December 31, 1992).
10.16 Limited Partnership Agreement of NOARK Pipeline System, Limited
Partnership, dated October 10, 1991, and amended February 24, 1993
(original agreement incorporated by reference to Exhibit 10.23 to Annual
Report on Form 10-K for the year ended December 31, 1991; amended
agreement incorporated by reference to Exhibit 10.21 to Annual Report on
Form 10-K for the year ended December 31, 1992).
10.17 Operating Agreement of NOARK Pipeline System, dated March 19, 1991
(incorporated by reference to Exhibit 10.25 to Annual Report on Form 10-K
for the year ended December 31, 1991).
16
EXHIBIT
NO. DESCRIPTION
------- -----------
10.18 Agreement for Sale of Partnership Interest between Southwestern Energy
Pipeline Company and GRUBB NOARK Pipeline, Inc., dated July 24, 1992
(incorporated by reference to Exhibit 10.25 to Annual Report on Form 10-K
for the year ended December 31, 1992).
13. 1994 Annual Report to Shareholders, except for those portions not
expressly incorporated by reference into this Report. Those portions not
expressly incorporated by reference are not deemed to be filed with the
Securities and Exchange Commission as part of this Report (filed
herewith).
22. Subsidiaries of the Registrant (incorporated by reference to Exhibit 22 to
Annual Report on Form 10-K for the year ended December 31, 1992).
17