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XTO's Record 3Q Production Pushes Earnings Higher

Spurred higher by record oil and natural gas production, XTO Energy Inc.'s net income for the third quarter reached $367 million, or $1.00 per share (99 cents diluted), a 17% increase from third quarter 2005 net income of $313 million, or 86 cents per share (85 cents diluted).

After adjusting for the after-tax effects of the derivative fair value gain, the Fort Worth-based producer posted adjusted earnings for 3Q2006 of $348 million, or 95 cents per share (94 cents diluted). Third-quarter 2005 adjusted earnings were $309 million, or 86 cents per share (84 cents diluted).

XTO's record third-quarter 2006 production of 1.553 Bcfe/d was up 11% from 3Q2005 and up 2.5% sequentially from the 1.516 Bcfe/d in 2Q2006. The company said third-quarter daily gas production averaged 1.213 Bcf, up 12% from 3Q2005 daily production of 1.087 Bcf. Daily oil production for the third quarter was 44,438 bbls, a 7% increase from the third quarter 2005 level of 41,484 bbls. During the quarter, daily natural gas liquids production was 12,198 bbls, a 19% increase from 3Q2005.

XTO recorded total revenues for 3Q2006 of $1.10 billion, a 14% increase from the $964 million in the prior year's quarter.

"Across all basins, our development campaign is providing strong drilling and production results," said Keith A. Hutton, XTO Energy's president. "In the Barnett Shale, net volumes accelerated to 203 MMcf/d, up 19% quarter-over-quarter, as wells in the core-area continue to beat expectations.

"In the Eastern Region, the Freestone Trend gross production grew about 2% to 564 MMcf/d, though overall production increases in the region were tempered by the timing of completions and field pressures," Hutton said. "In the Midcontinent and San Juan divisions, a combination of production increases from the Arkoma Overthrust, San Juan conventional and coalbed methane more than offset the [Hugoton Royalty Trust] production distributed to shareholders. Overall, our operational activities are yielding record unit growth, solid reserve additions and new low-risk inventory for future growth."

XTO Energy CEO Bob Simpson said the company's results remain "exceptional" despite the "volatile commodity cycle" this year. "We are doggedly managing to strengthen operating cash flow, at greater than 60% of revenues, and to moderate expenses," Simpson added. "Given our prolific drilling inventory, our operational teams are delivering record results. Production is now targeted to grow by about 14% above last year, not including the 2% of volumes already distributed to owners via the Hugoton Royalty Trust units. XTO is on track for another record year in 2006, both operationally and financially."

During the fourth quarter, XTO expects to produce 1,215-1,225 MMcf/d of natural gas, 12,000 b/d of natural gas liquids and 45,000 b/d of crude. From October through December 2006, XTO has 800 MMcf/d hedged at $10.28/Mcf. Looking at full year 2007, the company has 500 MMcf/d hedged at $10.05/Mcf.

The domestic energy producer's properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana and Mississippi.

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