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Rating Action:

Moody's upgrades Southwestern's ratings to Ba1 with a positive outlook

17 Sep 2010

Approximately $675 million of debt securities affected

New York, September 17, 2010 -- Moody's Investors Service upgraded the ratings for Southwestern Energy Company (SWN). The ratings affected include the Corporate Family Rating (CFR) being upgraded to Ba1 from Ba2, the senior unsecured notes rating being upgraded to Ba1 from Ba2, and the Probability of Default (PDR) being upgraded to Ba1 from Ba2. The outlook is positive. This concludes the ratings review initiated on May 26, 2010.

Upgrades:

..Issuer: Southwestern Energy Company

....Probability of Default Rating, Upgraded to Ba1 from Ba2

....Corporate Family Rating, Upgraded to Ba1 from Ba2

....Senior Unsecured Regular Bond/Debenture, Upgraded to Ba1 from Ba2

Outlook Actions:

..Issuer: Southwestern Energy Company

....Outlook, Changed To Positive From Rating Under Review

RATINGS RATIONALE

Moody's Investors Service upgraded the ratings for Southwestern Energy Company (SWN). The ratings affected include the Corporate Family Rating (CFR) being upgraded to Ba1 from Ba2, the senior unsecured notes rating being upgraded to Ba1 from Ba2, and the Probability of Default (PDR) being upgraded to Ba1 from Ba2. The outlook is positive. This concludes the ratings review initiated on May 26, 2010.

"The upgrade reflects SWN's significant growth of its reserves and production underpinned by a very strong operating performance and comparatively low leverage," said Ken Austin, Moody's Vice President. "Although the company's large concentration in the Fayetteville Shale is not compatible with an investment grade rating at this time, however, the positive outlook considers that there is sufficient opportunity for SWN to reduce this concentration risk over the next 12 to 18 months."

SWN's organic operating performance has been one of the strongest among the independent exploration and production (E&P) companies rated by Moody's over the past three years. The company has grown the scale of its production and reserves to an investment grade profile, while also maintaining a low cost structure and very modest leverage. On most of these measures, SWN compares favorably to the Ba peer group as well as some of the Baa.

However, the significant concentration risk of its productive base is a restraining factor for the ratings. At 6/30/10, approximately 84% of total production was from the Fayetteville Shale and approximately 85% of its year-end 2009 reserves were from the Fayetteville. While SWN's organic growth in the play has been strong, this type of concentration is not compatible with an investment grade profile as it depends too much on one producing area. In addition, SWN needs to demonstrate it is having a similar type of operating performance in another core area.

The positive outlook signals that Moody's believes SWN has opportunities to increase its diversification to sufficiently reduce this risk and bring the overall profile more in-line with an investment grade rating over the next 12-18 months, if not sooner.

An upgrade would be considered if SWN is successful in reducing its concentration in the Fayetteville Shale and that it is demonstrating good operating performance in a new core area. An upgrade would also require that SWN's leverage remains in-line with current levels and its cost structure remains low enough to preserve cash margins and returns in light of weak natural gas prices.

Conversely, a stable outlook would be considered if SWN's concentration risk does not improve, or if its leverage or operating performance weakens. This might be signaled by slowing production growth trends, or significantly higher unit costs begin to erode margins and returns.

The last rating action for SWN was on May 26, 2010 when we placed the ratings under review for possible upgrade.

The principal methodology used in rating Southwestern Energy was Moody's Global Exploration and Production (E&P) rating methodology, published in December, 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Southwestern Energy Company, which is headquartered in Houston, Texas, is engaged in the exploration and production of natural gas. The company's operations are principally focused in Arkansas with properties also in Oklahoma, Pennsylvania, and Texas.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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New York
Kenneth Austin
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Wood
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's upgrades Southwestern's ratings to Ba1 with a positive outlook
No Related Data.
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