Higher oil and gas prices spurred industry leaders ExxonMobiland Chevron to large leaps in fourth quarter 1999 earnings over thedepressed 4Q 1998. The two companies reported fourth quarterrealized U.S. natural gas prices up about 50 cents/Mcf over 4Q 1998and the full year average up about 15 cents over 1998. Unocal,Texaco and Conoco also enjoyed significant price appreciationfourth quarter over fourth quarter, although not as much gainyear-to-year.

ExxonMobil’s U.S. 4Q 1999 average was $2.54/Mcf, compared to$2.02 in 4Q 1998. Its 1999 average was $2.23, above the $2.05 1998quarter. ExxonMobil, reporting quarterly income for the first timeas a combined company since the Nov. 30 merger, saw a 34% rise fromOctober through December 1999 from $2.7 billion, or 77 cents/share,compared to $2 billion, or 58 cents/share, in the same 1998quarter.

“Upstream results benefited from the continued increase in crudeoil prices, which were up over $12 per barrel from the fourthquarter of 1998, along with a 5% increase in liquids production.Higher North American natural gas prices and lower explorationexpenses also improved upstream earnings,” said ExxonMobil ChairmanLee R. Raymond.

Chevron’s 4Q 1999 U.S. gas price was $2.49/Mcf, up from $1.98 in4Q 1998. Its yearly U.S. average totaled $2.16/Mcf, up from $2.02in 1998. Chevron’s fourth quarter results excluding special itemswere $819 million, 63% higher than 4Q ’98’s $503 million. Overall,the company showed an 18% gain in 1999 over 1998 with earningsbefore special items of $2.3 billion, up from $2 billion in 1998.

“The higher crude oil and natural gas prices increased 1999operational earnings in our exploration and production business by80%,” Chevron Chairman Dave O’Reilly said. “Average U.S. crude oilsales realizations for the year rose 41%, while our U.S. naturalgas realizations rose 7%. Earnings were further bolstered by a 2%increase in oil and gas production worldwide, partly the result ofour commitment to continue investment during the period of low oilprices in 1998 and the first half of 1999.” O’Reilly also said thecompany added oil and gas reserves during the year that totaledapproximately 105% of 1999 production – the seventh consecutiveyear that Chevron has added more than 100% of the year’s productionin reserves.

U.S. natural gas production was off slightly for Chevron, from1.7 Bcf/d in 1998 to 1.6 Bcf/d in 1999. ExxonMobil also reported aU.S. gas production decline from 3.1 Bcf/d in 1998 to 2.9 Bcf/d in1999. E-M’s totals for Canadian natural gas production showed anincrease in 1999 to 683 MMcf/d from 667 MMcf/d in 1998.

Chevron reported production start-up on its deep-water Gulf ofMexico properties – Genesis and Gemini. Gross oil-equivalentproduction from Genesis, operated and 57%-owned by Chevron, reached63,000 barrels per day by year-end. Gross oil-equivalent productionfrom the 40%-owned Gemini project reached 35,000 barrels per day.Evaluation of options is under way to develop a third Gulf ofMexico deep-water project, Typhoon. Chevron is the operator and 50%owner of Typhoon.

The company said it expected to begin production from itsdiscovery well (K-29) in the Fort Liard area of the NorthwestTerritories, Canada by May. Plans are being developed for theconstruction of production and transportation facilities. A secondsuccessful well (M-25) was completed in January 2000 and isexpected to begin producing in the fourth quarter 2000. Chevron isthe operator and has a 43% interest in both discoveries.

Chevron also said it would increase its investment in its28%-owned affiliate, Dynegy Inc., to maintain a comparablepercentage ownership once Dynegy merges with Illinova Corp.

Unocal’s Spirit Energy 76 unit saw domestic gas prices rise to$2.41/Mcf from $2.05 in the fourth quarter of 1998; however,production was off quarter-to-quarter to 722 MMcf/d from 798 MMcf/din the fourth quarter of 1998. “Commodity prices are strong andholding firm,” said Unocal CEO Roger C. Beach. “Spirit Energy’s netproduction ramped up at the end of 1999, and we expect firstquarter 2000 average daily production to be 4 to 6% above theaverage production for the fourth quarter. It’s that kind ofperformance in our mature assets that will allow us to execute ourstrategy of generating near-term earnings while pursuing long-termgrowth from our excellent exploration portfolio.”

Net earnings at Unocal grew to $137 million from $130 million in1998. Quarter-to-quarter, net earnings grew to $87 million from anet loss of $29 million in the fourth quarter of 1998, excludingspecial items.

At Texaco, domestic gas prices were up in the fourth quarter oflast year to $2.43/Mcf from $1.91/Mcf in the fourth quarter of1998. Year-to-year, the increase was not as sharp, $2.18 versus$2.00 for 1998. Texaco gas production decreased 7% for the fourthquarter and 10% for the year. “This decrease was due to naturalfield declines, asset sales and reduced investment consistent withour focus on capital efficiency.”

Texaco net income for 1999 more than doubled to nearly $1.18billion from $578 million the year before. Net income in the fourthquarter of last year was $318 million, compared to a net loss of$213 million in the fourth quarter of 1998.

Conoco enjoyed strong quarterly price strengthening, althoughyear-to-year improvement was minimal. Domestic gas prices rose o$2.50/Mcf in the fourth quarter last year from $1.77 in the fourthquarter of 1998. Year-to-year, prices improved two cents to$1.98/Mcf for 1999. Domestic gas production was off both by quarterand by year. Fourth quarter 1999 saw 838 MMcf/d produced, down from939 MMcf/d during the year-ago period. Last year’s productionaveraged 880 MMcf/d, down from 888 MMcf/d in 1998. Full-year netincome at Conoco was $744 million, up 65% from 1998.

Ellen Beswick; Joe Fisher, Houston

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