Southwestern Energy Company (SWN)

Cash and Cash Equivalents

Cash and cash equivalents are defined by the Company as short-term, highly liquid investments that have an original maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash.  Management considers cash and cash equivalents to have minimal credit and market risk.

Cash and Cash Equivalents

Cash and cash
equivalents are defined by the Company as short-term, highly liquid investments
that have an original maturity of three months or less and deposits in money
market mutual funds that are readily convertible into cash.  Management
considers cash and cash equivalents to have minimal credit and market risk.

align=justify>Inventory

align=justify>Inventory recorded in current assets includes $24.1 million at
December 31, 2008, and $25.0 million at December 31, 2007, for gas in
underground storage owned by the Company’s E&P segment, and $26.3 million at
December 31, 2008, and $8.1 million at December 31, 2007, for tubulars and other
equipment used in the Company’s E&P segment. Additionally, the Natural Gas
Distribution segment had current gas in underground storage of $21.6 million at
December 31, 2007, that was classified in the balance sheet as “Current Assets
Held for Sale.”

align=justify>The Company has one facility containing gas in underground
storage.  The current portion of the gas is classified in inventory and
carried at the lower of cost or market.  The non-current portion of the gas
is classified in property, plant and equipment and carried at cost.  The
carrying value of the non-current gas is evaluated for recoverability whenever
events or changes in circumstances indicate that it may not be recoverable.
Withdrawals of current gas in underground storage are accounted for by a
weighted average cost method whereby gas withdrawn from storage is relieved at
the weighted average cost of current gas remaining in the facility.

align=justify>Other assets includes $43.8 million at December 31, 2008, and
$16.7 million at December 31, 2007, for inventory held by the Midstream Services
segment consisting primarily of pipe that will be used to construct gathering
systems for the Fayetteville Shale play.

align=justify>Tubulars and other equipment used by the Company’s segments are
carried at the lower of cost or market and are accounted for by a moving
weighted average cost method that is applied within specific classes of
inventory items. Purchases of inventory are recorded at cost and inventory is
relieved at the weighted average cost of items remaining within a specified
class.