Southwestern Energy faces multiple lawsuits.

"The company recognized that and about one-and-a-half years ago,

changed the management of that division."

"We'll gear that back when this is over with."

Southwestern's latest appeal to the Arkansas Supreme Court asks

that the circuit court case in Sebastian County be delayed until the
company is satisfied all 7,000-plus possible class members - who live
throughout the nation and in Brazil, Australia and Canada - have been
served notice.
Now, the company faces at least three lawsuits, including a complex
$60 million class-action suit and a $70 million claim from a former
consultant who was himself previously sued by Southwestern Energy.

While Southwestern's lawyers prepare for the class-action trial,

they've asked a federal judge in Oklahoma City to postpone further
discovery and other work on another case.

"I think SEPCO decided that Denny had made too good of a deal,
and I think there were some corporate politics. SEPCO decided to
basically run them [the defendants] off," Peters says.

"There has never been any financial incentive for the company to
cheat its royalty owners. If [the company] didn't have royalty

owners, it couldn't drill gas wells."

Mars says he'll turn back to that lawsuit once the class-action
case is over.

In the class-action case, he adds, the company will argue that the
PSC has already decided the issues in favor of the royalty owners.

Public Service Commission

Eickenhorst filed a claim against Mars personally, accusing him of

defamation and other charges. She sought $900,000 in damages but the
claim was thrown out of court.

As to the class-action suit, Southwestern Energy is contending all

those issues were considered by the Arkansas Public Service Commission during a three-year
investigation. In 1994, the PSC found that the
company overpaid royalty owners to the detriment of ratepayers -
customers of Arkansas Western Gas.

"In Louisiana, you're dealing with very large landowners,

and Denny had established a rapport with those landowners in that area
through his earlier work," Peters says.

His attorney is Stephen Q. Peters, a partner in the law firm of

Harris McMahan & Peters of Tulsa.

SEPCO's lawsuit, however, " severely damaged"

Whinery's reputation in the oil and gas industry, Peters says.
"If you're an oil company and read about these allegations, it

would certainly make you very reluctant to do business with someone who
is guilty of what SEPCO alleged."

Still, at least one analyst who follows the company believes

Southwestern Energy has the potential to do well. Richard Straley, an
analyst for Stephens Inc. of Little Rock, has followed Southwestern
Energy for a decade, and he currently rates the stock
"outperform," a step above the neutral "hold" rating
and one below the outright positive "buy" rating. An
outperform rating means that analysts expect the stock price to
appreciate between 10 and 20 percent during the next 12 months.

Southwestern Energy plans a vigorous defense in the first suit

scheduled to come to trial.

Straley doesn't think it will necessarily take a major strike to

improve Southwestern Energy's performance, but a series of small

successes definitely would be beneficial.

The PSC's determination, Mars says, was that "if anybody

benefited from this gas contract, it was these royalty owners and
company shareholders. ... We put forth a pretty vigorous defense at the
PSC. They didn't buy anything we had to say."

Southwestern Energy Co. stock peaked at about $20 a share in late

1993 but hasn't been near that heady level since.
He adds, "Harold Korell is now president and chief operating
officer. He is, I think, in effect running the company day to day."

The case file consists of eight volumes, including a 1,356-page

transcript of the trial. Ultimately, Judge H. Franklin Waters found that
Southwestern Energy failed to prove its claim under the Arkansas Trade
Secrets Act but that Eikenhorst did indeed breech the agreements.
However, on neither point did the judge find that injunctive relief was
warranted.

Eventually, Southwestern Energy officials became convinced that

Eickenhorst was using her access to line up clients for a separate
class-action lawsuit. They filed a complaint in U.S. District Court in
Fayetteville and named Eickenhorst as the defendant. Although
Eickenhorst contended that the confidentiality agreements didn't
apply to her, she also argued that the information she used was
available in public documents.

That involves a counterclaim filed by Denny C. Whinery and his

business, Skelly Exploration Co. They were among the 17 defendants named
in a suit Southwestern Energy Production Co., a company subsidiary,
filed late last year.

But Southwestern Energy's lawyer, Thomas A. Mars of

Fayetteville, says that's not so.
The oil and gas industry, as a whole, has declined 40 percent to 50
percent in the past year, but the Fayetteville-based natural gas company
was ahead of the pack in that regard with poor performances for several
years.

That would be the class-action lawsuit scheduled for trial in

Sebastian County Circuit Court in Fort Smith. The suit was scheduled to
begin Sept. 28. Southwestern Energy asked the Arkansas Supreme Court -
in the fifth pretrial appeal filed in this case, in itself, a record,
according to the company's attorney - to delay the trial but the
state's highest court refused.

"It's a bizarre situation. For us to lose this case, this

jury would have to reject everything that the PSC said and did and
everything the [Arkansas] attorney general said and did in that
three-year investigation and reach the opposite conclusion," Mars
says.

During the course of that investigation, Eickenhorst, as a

representative of the law firm and of Enron, signed confidentiality

agreements regarding various internal documents supplied by Southwestern
Energy. The company supplied the documents in hopes of avoiding
prolonged litigation and, at one point, apparently had an agreement with
Enron to settle for $2.9 million, according to court records.

Peters says Whinery was an experienced geologist who proposed

involvement in the Boure project to SEPCO.

The lawsuit seeks damages of more than $60 million for thousands of
royalty interest owners who have contracts to sell to SEECO natural gas
pumped from wells in Franklin, Crawford, Washington, Logan and Johnson
counties. Essentially, the complaint contends SEECO underpaid royalty
holders to sweeten its deal with Arkansas Western Gas.

"The essence is we have a one-page contract that we believe can

be interpreted only one way. It gives us a 25 percent interest in the
Boure project, which everyone agreed at the time the deal was
consummated was worth at least $7.5 million [for that 25 percent
interest]," he says.

Mars says one interlocutory or pretrial appeal is unusual. Five is

"clearly a record."

Whinery, through his lawsuit, contends SEPCO reneged on its agreement

with him because some company executives thought his deal was too good.

The case was filed two years ago against Southwestern Energy; its
exploration division, SEECO Inc.; and its natural-gas utility, Arkansas
Western Gas Co. The suit alleges fraud, breach of good faith and fair
dealing duties, tortuous interference with contractual relations, civil
conspiracy and unjust enrichment.

Counterclaim
In the original lawsuit, SEPCO accuses the defendants of
racketeering, fraud, breach of contract and fiduciary duty, negligence
and intentional interference regarding 3-D seismic mapping - to scope
out possible drilling sites in the Boure Basin in southern Louisiana.
Most of the defendants have reached settlements, but Whinery decided to
fight back, and he's seeking damages of $70 million.

In the meantime, Southwestern has withdrawn its settlement offer to

Enron, which has opted out of the pending class-action suit and filed
its own claim against the company in Franklin County Circuit Court.

Contentious History

The relationship between the company and at least one of the

plaintiffs' attorneys has been acrimonious as well as litigious.

Marilyn J. Eickenhorst was a Houston lawyer with the firm of

Clements, O'Neill, Pierce & Niches, a firm that represented
Enron Oil & Gas Co., among the world's largest companies. As an

associate of the firm, Eickenhorst was asked to look into a possible

claim against Southwestern and its subsidiaries regarding nonpayment of
overriding royalties on oil and gas leases in several Arkansas counties
that dated from 1939.

Although Southwestern Energy officials previously indicated they had

turned over evidence of wrongdoing to federal law enforcement officials,
Peters says he and his investigator have found no evidence that an
investigation was ever opened.

"I feel pretty good about the rating," Straley says.

"Stock prices have gotten down so low, I think it totally reflects
the uncertainty with natural gas prices."

Lease agreements with property owners are "the heart and soul of
every natural gas production company," he says.

He denies, however, Whinery's claims and says claims of

defamation and slander have become "standard big-city
tactics."

Straley says Southwestern's battering of recent years is due to

its poor exploration results.