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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) May 15, 1996
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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.)
1083 Sain Street, P.O. Box 1408, Fayetteville, Arkansas 72702-1408
(Address of principal executive offices, including zip code)
(501) 521-1141
(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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Item 5.
Other Events
On May 15, 1996, a lawsuit was filed in state court in Franklin County,
Arkansas, against the Registrant, its utility subsidiary, Arkansas Western Gas
Company, and its exploration and production subsidiary, SEECO, Inc., alleging
the underpayment of "millions of dollars" of overriding royalties by the
Registrant and its subsidiaries. The complaint alleges that, pursuant to
assignments of oil and gas leases between the Registrant's predecessor and the
plaintiff's corporate predecessor, dated December 12, 1939 and November 24,
1943, the plaintiff is entitled to the payment of additional overriding
royalties arising from oil and gas leases. The plaintiff's claim is based in
part upon the contention that it is entitled to overriding royalties on the
original leases assigned in 1939, even though (1) the leases were not
specifically identified in that assignment, (2) the leases expired by their
terms, and (3) some of the lands are now leased by other parties. The plaintiff
also claims that the overriding royalties burden subsequent leases entered into
at different times under a variety of different circumstances. In this respect,
the Registrant believes that the plaintiff's claim is inconsistent with the
position taken by its predecessors for more than fifty years. The plaintiff
further alleges the underpayment of overriding royalties arising from
contractual arrangements for the purchase and sale of natural gas between
affiliated subsidiaries of the Registrant dating back to 1978. The claims
include breach of the 1939 and 1943 assignments, breach of implied covenants in
the underlying oil and gas leases, violation of statutory duties regarding the
method and timing of paying royalties, and misrepresentation, as well as
equitable claims for relief that do not involve the payment of money damages.
The Registrant filed an answer on June 6, 1996, denying the material allegations
of the complaint and raising a number of affirmative defenses. The Registrant
believes that the complaint is substantially without merit and anticipates
vigorously contesting the allegations. At this time, the parties have not
engaged in any formal discovery, no other pleadings have been filed by any of
the parties, and no trial date has been set.
On May 24, 1996, a purported class action suit was filed against the
Registrant, its utility subsidiary, Arkansas Western Gas Company, and its
exploration and production subsidiary, SEECO, Inc., in state court in Sebastian
County, Arkansas. In reliance on legal advice from an attorney who had
previously represented the plaintiff in the earlier discussed lawsuit, and whose
services were terminated by that plaintiff on May 16, 1996, the individual
royalty owners authorized the filing of the complaint ("the royalty owner
complaint") in their own behalf and on behalf of other similarly situated
royalty owners. In the royalty owner complaint, the individual plaintiffs allege
that the Registrant and its subsidiaries have breached implied covenants in
certain oil and gas leases, violated statutory duties regarding the method and
timing of paying royalties, misrepresented or failed to disclose material facts
to royalty owners concerning gas purchase contracts between the Registrant's
affiliates, and failed to fulfill other alleged common law duties to the
plaintiffs. The individual plaintiffs seek damages on behalf of more than 3,500
royalty owners, which damages are estimated by the individual plaintiffs to be
in excess of $58 million dollars in the aggregate. The individual
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royalty owners also seek an unspecified amount of punitive damages. The
Registrant believes that the claims made by the royalty owners aresubstantially
without merit and anticipates vigorously contesting these claims.
While there can be no assurance as to the ultimate resolution of the
matters described above, management does not believe that the Registrant's
ultimate liability, if any, will be material to its consolidated financial
position or results of operations.
SIGNATURES
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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: July 2, 1996 BY: /s/ GREG D. KERLEY
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Greg D. Kerley
Vice President -- Treasurer and
Secretary
