ExxonMobil, EnCana and ConocoPhillips released positive reports on their 2004 reserves additions last week. During a year when several of their peers were forced to significantly revise downward their reserves estimates, ConocoPhillips said it posted a 65% reserve replacement ratio, EnCana’s proved gas reserves jumped 24% and ExxonMobil’s grew by about 0.9% from the 22 billion boe the company reported at the end of 2003.

Smaller independent Magnum Hunter, which is being bought by Denver-based Cimarex, said its 2004 year-end total proved reserves of 1.01 Tcfe were up 20% over the 838.4 Bcfe reported a year earlier. Magnum Hunter added 248.6 Bcfe of total proved reserves during 2004 from all sources, which replaced 309% of its 80.4 Bcfe in production.

“Our company was again successful at ‘bucking the trend’ throughout our industry by growing its proved reserves over 20% to an important milestone of just over 1 Tcfe,” said Magnum Hunter CEO Gary C. Evans. “We were able to replace over 300% of our production and grew daily oil and gas production by 10% in 2004. More important, though, is how this success should continue to augment the growth profile of the new combined corporate structure of Cimarex Energy and Magnum Hunter when the merger of our two companies is completed this year.”

ExxonMobil Corp. said Friday that it added 1.8 billion boe of oil and gas reserves in 2004, which beat its 2003 additions of 1.7 billion boe. Last year reserves replaced 112% of its production, compared to 2003 when its production replacement rate was 105%. The company reported 22.2 billion boe of total proved reserves at the end of 2004.

“This represents the eleventh consecutive year of greater than 100% reserve replacement, demonstrating the outstanding capability of our upstream organization and the corporation’s commitment to long-term growth,” said CEO Lee Raymond.

However, the new guidelines from the Securities and Exchange Commission require the company to measure reserves utilizing Dec. 31, 2004 liquids and natural gas prices. This results in a reserves addition of only 1.3 billion boe in 2004 and a reserve replacement ratio of only 83%, ExxonMobil said. The company disputed the new reserves calculation methodology. “The use of prices from a single date is not relevant to the investment decisions made by the corporation, and annual variations in reserves based on such year-end prices are not of consequence in how the business is actually managed,” ExxonMobil said.

It said the SEC’s new guidelines resulted in a misleading calculation. “The most significant single impact of employing Dec. 31 prices occurred for the Cold Lake field (heavy oil-bitumen steam project in Canada), where approximately 0.5 billion barrels were removed from the proved category while still remaining part of our total resource base. Prices for Cold Lake were strong for most of 2004. However, on the day of Dec. 31, 2004, prices were unusually low due to seasonally depressed asphalt sales and industry upgrader problems in Western Canada. Prices quickly rebounded from Dec. 31, and through January 2005, returned to levels that have restored the reserves to the proved category,” the company said.

ExxonMobil said the bulk of its proved reserves came from Qatar, where it is developing a massive natural gas liquefaction project with Qatar Petroleum. It made proved reserve additions in Qatar totaled 1.7 billion boe. “ExxonMobil’s commitment of capital to this growing LNG business, which is underpinned by our confidence in the demand for gas and the liquidity of our targeted gas markets, has been the subject of several press announcements during 2004,” the company noted.

Proved additions were also made in West Africa from developments in Nigeria, Equatorial Guinea and Angola and from new developments and established operations in Europe and the Caspian region. Production totaled 1.6 billion boe in 2004. Liquids production was 935 million bbl, and natural gas production totaled 3.9 Tcf.

For total resources, ExxonMobil said it added 2.9 billion net boe from new fields in 2004 to its resource base, which it estimates at 73 billion boe, including proved reserves and other discovered resources that will likely be developed.

ConocoPhillips announced preliminary net reserve additions in 2004 of 1.246 billion boe, including equity affiliates. The company’s reserve replacement ratio was 206%, based on 605 million boe of production, bringing its total reserve base to 8.5 billion boe, excluding 0.3 billion bbl associated with its Canadian Syncrude operations. Excluding sales and acquisitions, ConocoPhillips’ reserve replacement ratio was 65%.

“We are focused on replacing reserves at competitive finding and development cost,” said Bill Berry, executive vice president of ConocoPhillips’ exploration and production unit. “In 2004, we advanced several key projects that positively impacted the company’s reserves, including projects in the Caspian Sea, North Sea, Alaska and Indonesia.”

Due to unusually low year-end Canadian bitumen values, the company recorded a negative revision of proved crude oil reserves for its Surmont project. “We continue to believe Surmont is an economic project that adds value to our integrated asset base, and we are proceeding with development,” Berry said. EnCana Corp. said its proved gas reserves increased 24% to 10.5 Tcf and the company’s daily gas sales increased 17% to 3 Bcf/d. Organic gas production replacement was 204%. When acquisitions and divestitures are included, EnCana’s gas production replacement was 286%, meaning that the company added more than 3 Tcf of proved reserves compared to the 1.1 Tcf produced in 2004.

EnCana’s total reserve additions, net of acquisitions and divestitures, were 3.2 Tcfe, excluding the downward bitumen reserves revision based on year-end pricing announced Feb. 1.

“Our natural gas resource plays continue to deliver strong growth in production and reserves,” said CEO Gwyn Morgan. “During the past year, we undertook several major steps in sharpening our strategic focus on North American unconventional resources. The acquisition of Tom Brown, Inc. and the sale of our U.K. North Sea assets were major strides in accomplishing that objective.

“With the addition of 2.2 Tcf of proved reserves through the drill bit plus another 0.9 Tcf of net reserve additions through acquisitions and divestitures, we have grown the underlying value of the company and net asset value of each share.”

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