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Hurricanes Dampen 3Q Production Outlooks

El Paso Corp. said last week about 80 MMcfe/d of its Gulf of Mexico production shut in during Hurricanes Katrina and Rita will not come back online until the first quarter of 2006. Burlington Resources Inc. and Newfield Exploration Co. also blamed storms for lower 3Q production and full-year output forecasts.

El Paso said net production offshore totaled 205 MMcfe/d prior to Katrina and 170 MMcfe/d before Rita. Net production currently totals 64 MMcfe/d, and output is expected to continue to increase through the rest of the year, El Paso said. Production levels in the Gulf are expected to be about 90 MMcfe/d by Nov. 1 and "will approach" 115-120 MMcfe/d by Dec. 1. About 40 MMcfe/d currently shut in is operated by other companies.

El Paso also noted initial production from two recent discoveries, West Cameron blocks 75 and 62, may be delayed into early 2006 because of storm damage affecting a third-party pipeline and processing facilities.

In the Texas Gulf Coast and Arklatex areas onshore, damage from Hurricane Rita to third-party processing facilities initially impacted approximately 60 MMcfe/d. Repairs to these facilities have been completed, and the shut-in production is back on stream, El Paso said.

Burlington Resources expects 3Q2005 daily production will fall within the lower end of its 2,800-3,000 MMcfe/d guidance because of the two storms' impact. The producer has restored most of the 180 MMcfe/d of production that was curtailed immediately following Hurricane Rita, and said it is "working aggressively" to restore another 60 MMcfe/d, or 2% of the company's total production volume, which remains shut in.

Also on a preliminary basis, Burlington average realized commodity prices for the quarter, including results of hedging and wider-than-normal basis differentials for natural gas, are expected to range between $7-7.30/Mcf, $34-35/bbl of natural gas liquids and $56-57/bbl of crude oil. Unit costs, when adjusted for expected production volumes, are expected to remain within previously disclosed guidance ranges, with the exception of general and administrative expenses, Burlington said.

These expenses, when compared to previous guidance, will include approximately $30 million in additional pretax costs related to the mark-to-market on a stock-based compensation program reflecting Burlington's share price at the end of the quarter. Burlington will announced its 3Q2005 earnings on Oct. 27.

Meanwhile, Newfield said year-to-date, four major weather events have caused production deferrals in the Gulf -- Hurricanes Dennis, Katrina and Rita and Tropical Storm Arlene, and the full-year impact will result in the deferral of 18-20 Bcfe.

Since Hurricane Rita, Newfield said it has restored Gulf production of 60 MMcfe/d net out of total net production of about 320 MMcfe/d. Only 14 MMcfe/d net is associated with lost platforms or structures. The remainder is related to damage to host platforms, pipeline infrastructure and onshore processing facilities. It estimated up to 220 MMcfe/d net of the shut-in production could resume within the next month if the condition of pipelines, host facilities and onshore processing plants will permit.

In the meantime, Newfield also said it has signed an agreement with ExxonMobil Corp. to jointly explore and develop 52,000 gross acres controlled by ExxonMobil in South Texas. Newfield expects that two or three drilling rigs will be active on these properties over the next three years.

The agreement covers properties in Kenedy, Starr and Hidalgo counties, all of which are located in Newfield's core South Texas activity regions. Since entering South Texas in 2000, Newfield has grown net production to a current rate of more than 200 MMcfe/d. In addition to the acreage covered under this venture, Newfield owns interests in more than 200,000 gross lease acres in South Texas.

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