Things are looking up at Mitchell Energy & Development Corp.at a time when the company is up for potential sale. Mitchellreported third quarter net earnings of $29.5 million versus a lossof $3.7 million in the prior-year period. The current quarter’sresults included a $5 million ($3.1 million after-tax) reversal ofprevious litigation provisions. Excluding the reversal, earningsincreased $30 million compared with the prior-year period,primarily due to significantly higher energy prices and loweroperating expenses. These positive factors were partially offset bythe adverse impact of natural gas and natural gas liquidsproduction curtailments in early August associated with a six-dayshutdown of the Bridgeport gas processing plant for maintenance andequipment upgrades.

“These are the best quarterly earnings we’ve had during the lastthree years,” said CEO George P. Mitchell. “While higher commodityprices certainly were the largest contributor, financial resultsalso benefited from cost-cutting measures implemented late lastyear.”

Mitchell, The Woodlands, TX, is one of the country’s largestindependent producers of gas and gas liquids. In October,Mitchell’s board of directors hired Goldman, Sachs & Co. andChase Securities Inc. to help weigh strategic alternatives,including a sale or merger (see Daily GPI Oct. 7). Mitchell said itwould not comment until a decision is made.

“Operationally, accelerated development of the Barnett Shaleplay in North Texas using ‘light sand’ fracture technology isbeginning to add significantly to our natural gas production. Westepped up drilling in the Barnett during the summer, and net gasproduction from the Barnett has increased from 74 MMcf/d to morethan 90 MMcf. We plan to add a fifth rig there next month and alsoa third rig in the North Personville area of East Texas.Company-wide, natural gas sales are already running 250 MMcf/d,ahead of the target we set back in the summer. With a backlog ofexcellent drilling opportunities in our major fields, we expect toincrease natural gas sales by more than 10% annually over the nextseveral years.

“In gas processing, operating improvements, increased drillingactivity behind our plants and the recent purchase of theoutstanding 50% interest in the Jameson plant have combined to pushcurrent NGL production to almost 52,000 barrels per day. Given thepositive outlook for energy prices and expected growth in bothnatural gas and NGL volumes, earnings should continue to be stronginto next year.”

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