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Early Survey Shows Production 0.5% Below 2Q1999 Levels

Early Survey Shows Production 0.5% Below 2Q1999 Levels

A preliminary survey of second quarter financial reports from 25 producers reveals a 0.5% decline in U.S. gas production compared to 2Q99. Out of 25 producers, 14 reported lower production and five of those showed double digit drops. Pioneer Resources, Ocean Energy, Union Pacific and Kerr McGee showed the largest U.S. production declines on a percentage basis.

Leading the field in production growth this quarter were Coastal (up 70%), Santa Fe Snyder (up 46%), Cross Timbers (up 37%), Equitable (up 34%) and Anadarko (up 16%). Gas prices were up substantially compared to last year with the majority of producers in the survey reporting dollar-plus increases. The average of all of the companies surveyed showed an increase of $1.11 per Mcf, from $1.98 during the 1999 second quarter to the current $3.09.

"I am not surprised that production is still off from a year ago, I think it reflects the struggle out here that companies have to grow domestic production," explained analyst Robert Morris of Salomon Smith Barney. "Budgets for most companies out there this year still are well below what they will cash flow. We are going to start to see production come up, but we are a long ways from getting back to where we were at the beginning of 1999. I think things will continue to be tight for quite some time here."

However, production for the first six months of 2000 came in slightly higher than it did for last year's equivalent time period. Natural gas production rose 0.5% from 15,146 MMcf/d in the first half of 1999 to 15,226 MMcf/d. Prices per Mcf went from an average of $1.85 for the first six months of 1999, to $2.74 for the first two quarters of 2000, a difference of 89 cents.

"We will probably pull our data together before the next report that we send out, mainly because there is not a large enough sample yet to be sure of what it says," said WEFA Energy Services' Vice President, Ron Denhardt. "The one thing that I am always concerned about is that one or two large producers can make a huge difference."

Natural gas drilling went up by 8 rigs this week from the previous high of 764 to hit another peak at 772 active rigs in North America (see NGI, July 24). That's 256 more rigs focused on natural gas than there were one year ago, according to the Baker Hughes rig count on Friday.

"With the rig count where it is, we are at the point of seeing some upswing, or increase in production," said Morris. "That was not apparent in the second quarter because we only recently here in the third quarter got the rig count well above 650. There is some lag time."

This study includes a cross-section of small and large producers operating within the United States. Results may be affected by mergers, buy-outs, as well as company size.

Alex Steis

Sample Shows U.S. Gas Production Down 0.5%

               U.S. Gas Production (MMcf/d)        U.S. Realized Prices
                2Q2000    2Q1999    Change      2Q2000    2Q1999     Change
ExxonMobil       2,821     2,803       1%          NA         NA        NA
Chevron          1,506     1,638      -8%          NA         NA        NA
Burlington       1,470     1,435       2%       $2.40      $1.90      $0.50
Texaco           1,349     1,479      -9%       $3.28      $2.05      $1.23
Vastar           1,045     1,095      -5%       $2.97      $1.89      $1.08
Coastal            948       558      70%       $2.69      $1.87      $0.82
Phillips*          898       957      -6%       $2.95      $1.91      $1.04
UPR**              873     1,026     -15%          NA         NA        NA
Conoco             837       900      -7%       $2.66      $1.68      $0.98
Unocal***          756       764      -1%       $3.41      $2.05      $1.36
Occidental         715       670       7%          NA         NA        NA
Marathon           712       742      -4%       $2.95      $1.81      $1.14
EOG                633       642      -1%       $3.39      $1.99      $1.40
Anadarko****       536       461      16%       $3.20      $1.95      $1.25
Apache             476       447       6%       $3.38      $2.19      $1.19
Kerr McGee*****    472       548     -14%       $3.71      $2.18      $1.53
Santa Fe Snyder*   372       255      46%       $3.20      $2.03      $1.17
Ocean*             344       465     -26%       $3.36      $1.92      $1.44
Cross Timbers      331       242      37%       $2.72      $1.81      $0.91
Amerada Hess       298       329      -9%       $3.37      $2.06      $1.31
Equitable          235       175      34%          NA         NA        NA
Pioneer            230       334     -31%       $3.24      $2.16      $1.08
Houston Explr      203       183      11%       $2.98      $2.03      $0.95
HS Resources       183       162      13%       $2.76      $1.93      $0.83
Basin               58        87     -33%       $3.24      $2.15      $1.09
Total           18,300    18,397    -0.5%       $3.09      $1.98      $1.12

*Prices are unhedged.
**Merged with Anadarko during the quarter.
***Lower 48 States
****Merged with UPR during the quarter.
*****Onshore Price

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