CONSULTING AGREEMENT

     THIS CONSULTING AGREEMENT (“Agreement”) is made and entered into as of May
15, 2002, at Fayetteville, Washington County, Arkansas, by and between
SOUTHWESTERN ENERGY COMPANY, an Arkansas business corporation, designated herein
as SWEN, and CHARLES E. SCHARLAU, designated herein as Scharlau.

W  I  T  N  E  S  S  E  T  H:

     A.     PARTIES:

     1.     SOUTHWESTERN ENERGY COMPANY (“SWEN”) is an Arkansas business
corporation with its principal office being situated in Houston, Harris County,
Texas, and it is the parent company of the following wholly-owned subsidiary
corporations (“Subsidiaries”):

       (a) Arkansas Western Gas Company. Arkansas Western Gas Company (“AWG”) is
an Arkansas business corporation with its home office being situated in
Fayetteville, Washington County, Arkansas, and it is a natural gas distribution
public utility in the State of Arkansas;          (b) SEECO, Inc. SEECO, Inc.
(“SEECO”) is an Arkansas business corporation with its home office situated in
Fayetteville, Washington County, Arkansas, and it is engaged in the natural gas
exploration, development and production business in the State of Arkansas;    
     (c) Southwestern Energy Production Company. Southwestern Energy Production
Company (“SEPCO”) is an Arkansas business corporation with its home office
situated in Houston, Harris County, Texas, and it is engaged in the oil and gas
exploration, development and production business in the States of Arkansas,
Oklahoma, Texas, Louisiana and other areas in the United States and in the Gulf
of Mexico; and          (d) AW Realty Company. AW Realty Company (“AWR”) is an
Arkansas business corporation with its home office situated in Fayetteville,
Washington County, Arkansas, and it is engaged in real estate development and
sales and owning and operating rental properties in Arkansas.

     2.     Charles E. Scharlau. Charles E. Scharlau (“Scharlau”) is a natural
person, he is now and since June of 1951, he has been a licensed attorney at law
in the State of Arkansas; and he first became an employee of AWG in 1951, and he
served the organization as the head of the legal department until 1968, when he
became the President and the Chief Executive Officer of the organization. In
addition, he is now and at all times since 1968 he has been a member of and the
Chairman of the Board of Directors.

 

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     B.     RECITALS.

     1.     SWEN, as the parent corporation of all the Subsidiaries, is engaged
in the business of oil and gas exploration and development; the sale and
distribution of oil and gas; the natural gas public utility business; the real
estate development business; and the ownership of real estate for sale and
rental, all for the production of income.

     2.     Scharlau is a regularly licensed attorney in the State of Arkansas,
and is an experienced corporate executive in the field of oil and gas
exploration and development, the sale and distribution of oil and gas, the
natural gas utility distribution business, the development and sale of real
property and the ownership and operation of rental real estate.

     3.     SWEN wishes to be assured of the consulting services of Scharlau,
particularly with reference to the operation of the businesses now conducted by
SWEN and the Subsidiaries as specified above and in the areas indicated.

     4.     The purposes of this Agreement are:

       (a) To provide for the engagement of Scharlau as a business consultant
and advisor to SWEN and its Subsidiaries;          (b) To secure for SWEN and
all of its Subsidiaries the advisory and consulting services of Scharlau (the
“Services”) and to provide for the payment of compensation to Scharlau for the
Services to be rendered directly to SWEN and the Subsidiaries and any other
entities that are now owned or which may be owned by SWEN and/or the
Subsidiaries in the future; and          (c) To assure that Scharlau shall not
compete with SWEN and/or any of its Subsidiaries in any undertaking of any
advisory and consulting services in the area of the operations of SWEN and the
Subsidiaries during the term hereof and for two (2) years after the expiration
of this Agreement.

     C.     AGREEMENT. FOR AND IN CONSIDERATION of the foregoing recitals and of
the mutual and interdependent promises contained herein, SWEN hereby engages
Scharlau as an independent consultant and Scharlau accepts such engagement, in
accordance with the terms set forth herein:

       1. Term. This Agreement shall commence with SWEN’s Annual Meeting in 2002
and, subject to the other provisions hereof, shall continue in full force and
effect until SWEN’s Annual Meeting in 2005 (the “Term”). This Agreement may be
extended beyond the initial Term by the mutual agreement of SWEN and Scharlau.
Any such extension of the initial Term shall be executed no later than thirty
(30) days prior to the expiration of the initial Term. During the Term of this
Agreement, Scharlau shall perform such Services to SWEN and represent SWEN in
such manner as may be reasonably requested by the Chief Executive Officer or the
Board of Directors of SWEN.

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       2. Compensation. As compensation for the Services, SWEN shall pay to
Scharlau the sum of $5,000 per year (the “Consulting Fee”). The Consulting Fee
for the first year of the Term shall be paid to Scharlau no later than June 1,
2002. The Consulting Fee for the second year of the Term shall be paid on the
date of SWEN’s Annual Meeting in 2003 and the Consulting Fee for the third year
of the Term shall be paid on the date of SWEN’s Annual Meeting in 2004.    
     3. Expenses. Scharlau shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by Scharlau in connection with the provision of
Services hereunder. Reimbursement shall be made in accordance with the Company’s
policies and procedures for reimbursing third party consultants.          4.
Meetings, Conventions and Seminars. Scharlau is encouraged and is expected to
attend seminars, professional meetings and conventions, and educational courses.
The cost of travel, tuition or registration, food and lodging for attending
those activities will be paid by SWEN. Other costs are Scharlau’s expense,
unless SWEN authorizes those costs. If those other costs are authorized
expenses, Scharlau will be reimbursed after satisfying SWEN’s policies and
procedures for such reimbursement (which may include a requirement that Scharlau
submit an itemized expense voucher).          5. Promotional Expenses. Scharlau
is encouraged and is expected, from time to time, to incur reasonable expenses
for promoting SWEN’s business. Such promotional expenses include travel,
entertainment, professional advancement and community service expenses. Scharlau
agrees to bear those expenses except to the extent that those expenses are
incurred at SWEN’s specific direction or those expenses are specifically
authorized by SWEN as expenses that SWEN may pay directly or indirectly through
reimbursement to Scharlau.          6. Outside Activities. During the Term of
this Agreement, Scharlau may (i) serve on corporate, civic or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions; (iii) manage personal investments and (iv) engage as
an attorney, consultant, advisor or investor in any business enterprise,
provided that (i) there is no conflict of interest with SWEN as outlined in
Section 7 below and (ii) such activities do not significantly interfere with the
performance of Scharlau’s Services to SWEN. To the extent that any such
activities have been conducted by Scharlau before the execution date of this
Agreement, such prior conduct of activities and any subsequent conduct of
activities similar in nature and scope may not be deemed to interfere with the
performance of Scharlau’s Services to SWEN.          7. Non-Compete Agreement.
For a period of two (2) years from and after the date of the termination of this
Agreement, Scharlau agrees that he will not, without the prior consent of SWEN
and the Subsidiaries, either directly or indirectly, (i) be engaged as chief
operating officer, manager, employee or director of, or agent, consultant or
business advisor for, or (ii) own a substantial ownership interest in, any
incorporated or

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  unincorporated oil and gas exploration, production and sales entity in the
geographical area of SWEN’s and the Subsidiaries’ area of operation. SWEN agrees
that it will not unreasonably withhold its consent to Scharlau acting as
attorney, advisor or consultant to any such entity if there is no conflict of
interest with SWEN.

       8. Non-Assignability. Neither this Agreement nor any rights hereunder
shall be assignable by either party.          9. Inurement. Except as provided
in Section 8 above, this Agreement shall be binding upon and inure to the
benefit of the parties hereto, their executors, administrators heirs-at-law,
successors and assigns.          10. Independent Contractor. The parties agree
that the Services to be rendered by Scharlau are as an independent contractor
and not as an employee, partner or agent of SWEN or its Subsidiaries.    
     11. Complete Agreement. This Agreement contains all the agreements,
conditions and understandings between the parties with respect to the subject
matter hereof and supersedes all prior understandings and agreements (whether
oral or written). No amendments to this Agreement shall be effective or binding
on any party unless the same shall be in writing and signed by all parties.    
     12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arkansas, excluding any choice of law
rules which may direct the application of the laws of another jurisdiction. In
the event that any portion of the Services provided to SWEN by Scharlau
constitute “Lobbying” under Arkansas law, Scharlau shall comply with all rules
and regulations that are applicable to “Lobbyists” under Arkansas law.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
original triplicates on the date first hereinabove written.

              SOUTHWESTERN ENERGY COMPANY;
ARKANSAS WESTERN GAS COMPANY;
SEECO, INC.; SOUTHWESTERN ENERGY
PRODUCTION COMPANY; AND AW REALTY
COMPANY               By:   Compensation Committee of the
Board of Directors ATTEST:               /s/ Robert L. Howard

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        Robert L. Howard           /s/ Mark K. Boling

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      /s/ Kenneth R. Mourton

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Mark K. Boling, Secretary       Kenneth R. Mourton                   /s/ John
Paul Hammerschmidt

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        John Paul Hammerschmidt                         EMPLOYEE:              
                    /s/ Charles E. Scharlau

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Charles E. Scharlau

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