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Major Producers Enjoy 4Q Gas Price Recovery

Major Producers Enjoy 4Q Gas Price Recovery

Higher oil and gas prices spurred industry leaders ExxonMobil and Chevron to large leaps in fourth quarter 1999 earnings over the depressed 4Q 1998. The two companies reported fourth quarter realized U.S. natural gas prices up about 50 cents/Mcf over 4Q 1998 and the full year average up about 15 cents over 1998. Unocal, Texaco and Conoco also enjoyed significant price appreciation fourth quarter over fourth quarter, although not as much gain year-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 1998 quarter. ExxonMobil, reporting quarterly income for the first time as a combined company since the Nov. 30 merger, saw a 34% rise from October through December 1999 from $2.7 billion, or 77 cents/share, compared to $2 billion, or 58 cents/share, in the same 1998 quarter.

"Upstream results benefited from the continued increase in crude oil prices, which were up over $12 per barrel from the fourth quarter of 1998, along with a 5% increase in liquids production. Higher North American natural gas prices and lower exploration expenses also improved upstream earnings," said ExxonMobil Chairman Lee R. Raymond.

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

"The higher crude oil and natural gas prices increased 1999 operational earnings in our exploration and production business by 80%," Chevron Chairman Dave O'Reilly said. "Average U.S. crude oil sales realizations for the year rose 41%, while our U.S. natural gas realizations rose 7%. Earnings were further bolstered by a 2% increase in oil and gas production worldwide, partly the result of our commitment to continue investment during the period of low oil prices in 1998 and the first half of 1999." O'Reilly also said the company added oil and gas reserves during the year that totaled approximately 105% of 1999 production - the seventh consecutive year that Chevron has added more than 100% of the year's production in reserves.

U.S. natural gas production was off slightly for Chevron, from 1.7 Bcf/d in 1998 to 1.6 Bcf/d in 1999. ExxonMobil also reported a U.S. gas production decline from 3.1 Bcf/d in 1998 to 2.9 Bcf/d in 1999. E-M's totals for Canadian natural gas production showed an increase in 1999 to 683 MMcf/d from 667 MMcf/d in 1998.

Chevron reported production start-up on its deep-water Gulf of Mexico properties - Genesis and Gemini. Gross oil-equivalent production from Genesis, operated and 57%-owned by Chevron, reached 63,000 barrels per day by year-end. Gross oil-equivalent production from the 40%-owned Gemini project reached 35,000 barrels per day. Evaluation of options is under way to develop a third Gulf of Mexico deep-water project, Typhoon. Chevron is the operator and 50% owner of Typhoon.

The company said it expected to begin production from its discovery well (K-29) in the Fort Liard area of the Northwest Territories, Canada by May. Plans are being developed for the construction of production and transportation facilities. A second successful well (M-25) was completed in January 2000 and is expected to begin producing in the fourth quarter 2000. Chevron is the operator and has a 43% interest in both discoveries.

Chevron also said it would increase its investment in its 28%-owned affiliate, Dynegy Inc., to maintain a comparable percentage 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/d in the fourth quarter of 1998. "Commodity prices are strong and holding firm," said Unocal CEO Roger C. Beach. "Spirit Energy's net production ramped up at the end of 1999, and we expect first quarter 2000 average daily production to be 4 to 6% above the average production for the fourth quarter. It's that kind of performance in our mature assets that will allow us to execute our strategy of generating near-term earnings while pursuing long-term growth from our excellent exploration portfolio."

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

At Texaco, domestic gas prices were up in the fourth quarter of last year to $2.43/Mcf from $1.91/Mcf in the fourth quarter of 1998. Year-to-year, the increase was not as sharp, $2.18 versus $2.00 for 1998. Texaco gas production decreased 7% for the fourth quarter and 10% for the year. "This decrease was due to natural field declines, asset sales and reduced investment consistent with our focus on capital efficiency."

Texaco net income for 1999 more than doubled to nearly $1.18 billion from $578 million the year before. Net income in the fourth quarter 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, although year-to-year improvement was minimal. Domestic gas prices rose o $2.50/Mcf in the fourth quarter last year from $1.77 in the fourth quarter of 1998. Year-to-year, prices improved two cents to $1.98/Mcf for 1999. Domestic gas production was off both by quarter and by year. Fourth quarter 1999 saw 838 MMcf/d produced, down from 939 MMcf/d during the year-ago period. Last year's production averaged 880 MMcf/d, down from 888 MMcf/d in 1998. Full-year net income at Conoco was $744 million, up 65% from 1998.

Ellen Beswick; Joe Fisher, Houston

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