XTO Energy Inc. Wednesday reported record quarterly gas production for 4Q2005 with an average 1.102 Bcf/d, up 20% from the previous year's 916 MMcf/d. The company realized an average of $9.09/Mcf in the quarter, contributing to record earnings of $454 million, or $1.25 per share ($1.22 diluted), a 161% increase from fourth quarter 2004 earnings of $174 million, or 50 cents per share (50 cents diluted).
XTO's overall production of gas, oil and liquids hit a record for 4Q2005 of 1.418 Bcfe/d, up 21% from the fourth quarter 2004 level of 1.169 Bcfe/d. Total revenues for the fourth quarter were a record $1.177 billion, a 96% increase from $601 million the prior year. After adjusting for the after-tax effects of stock incentive compensation and derivative fair value gain, adjusted earnings for fourth quarter 2005 were $440 million, or $1.21 per share ($1.18 diluted), compared to 4Q2004 adjusted earnings of $179 million, or 51 cents per share (51 cents diluted).
Operating income for the quarter was $750 million, a 141% increase from 4Q2004 operating income of $311 million. Operating cash flow, defined as cash provided by operations before changes in operating assets and liabilities and exploration expense, was a record $755 million, up 88% from 2004 fourth quarter comparable operating cash flow of $402 million.
The company set quarterly production records for all products. Daily oil production for the fourth quarter was 41,976 barrels, a 25% increase from the fourth quarter 2004 level of 33,494 barrels. During the quarter, natural gas liquids production was 10,643 bbl/d, a 23% increase from the prior year quarter rate of 8,628 bbl/d.
The $9.09/Mcf average realized natural gas price for the quarter was 71% higher than the 4Q2004 average price of $5.31/Mcf. The 4Q average oil price increased 21% to $49.59/bbl from the fourth quarter 2004 average price of $41.14/bbl. Natural gas liquids prices averaged $39.83/bbl for the quarter, a 28% increase from the 4Q2004 average price of $31.04.
For the year XTO's gas production was a record 1.033 Bcf /d, up 24% from 2004 daily production of 835 MMcf. The average realized gas price for 2005 was $7.04/Mcf, up 40% from the 2004 average price of $5.04 per Mcf.
"Once again, I am proud to report exceptional results for both the fourth quarter and full year. In 2005, XTO achieved production and reserve growth of about 30%, marking our twelfth straight year of increases. Our record financial performance highlights the company's strong cash margins and our robust economic returns on capital investments. XTO's combination of development upsides, low finding costs and financial firepower give us a unique advantage for the future," noted Bob R. Simpson, chairman and CEO.
"We see 2006 as another breakout year for our shareholders. The company is planning a base of 10% to 12% production growth. Our distribution of all remaining Hugoton Royalty Trust Units to shareholders is equivalent to about a 5% dividend. When combined with XTO's annual cash dividend, value creation for 2006 starts at 16% to 18%."
"Looking forward, our multi-year drilling inventory and long-lived production profile provide the confidence for continued growth," stated Keith A. Hutton, president. "Our diversity of resource basin projects will drive the growth.
"In East Texas XTO is the top tight gas producer, and our programs plan to increase production in the Freestone Trend by 50% over the next few years. In the Barnett Shale, our team is the top driller with 19 rigs at work. From the San Juan Basin up through the Rockies, XTO's coalbed methane production is scheduled to increase by 50% as we expand drilling and takeaway capacity. Our tight-oil projects are yielding significant production response in the legacy fields of the Permian Basin. Drilling in the prolific Piceance Basin is now under way. All told, our development work should continue to realize big opportunities," Hutton said.
XTO projects gas production will average 1,110 Bcf/d in 1Q2006 and between 1,130 and 1,175 Bcf/d for quarters two through four. The company expects it will receive between 19% and 23% less than the Nymex price for its gas in the first quarter due to regional differentials. The differentials for the second through the fourth quarters will be between 14% and 19% less than the Nymex price. It has hedged 300 MMcf/d through the first quarter 2006 at a price of $14.58/Mcf and 260 MMcf/d for the year 2006 at $11.06/Mcf.
For the year, the company reported record net income of $1.152 billion, or $3.21 per share ($3.15 diluted), compared with earnings of $508 million or $1.53 per share ($1.51 diluted) for 2004. Earnings for the year include the effects of a derivative fair value gain, stock incentive compensation and a gain on exchange of producing properties. Excluding these items, 2005 earnings were $3.24 per share ($3.17 diluted), compared to similarly adjusted earnings of $1.75 per share ($1.73 diluted) in 2004.
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