Record-breaking fourth quarter and year-end earnings havecreated more opportunities for U.S. independents this year, whichnow are flush with cash to ramp up North American exploration andproduction projects and many U.S.-based independents now areboosting capital spending in their E&P units to boost energyreserves, especially natural gas.

Still not complete, the news from several independents last weekwas impressive, with Anadarko Petroleum Corp. and Apache bothreporting record-breaking fourth quarters and plans to greatlyincrease production and exploration in 2001. Mitchell Energy &Development Corp. Pioneer Natural Resources Co., Devon Energy Corp.and Williams also are setting their sights on eclipsing productionrecords set in 2000.

Anadarko is channeling $2.8 billion more into its capital budgetthis year, a 65% increase, and most of the exploration will be inNorth America. More than half of the swollen budget is for ongoingdevelopment drilling to increase production from existing fields inTexas, the Gulf of Mexico, the Rockies, Western Canada, the NorthSlope of Alaska and Algeria.

Anadarko CEO Robert J. Allison Jr. said that the fatter budgetis directed toward finding more natural gas for North America.”Natural gas is and will continue to be in tremendous demand inNorth America. Therefore, the primary focus of this 2001 budget isto find new natural gas reserves and increase gas production in theLower 48, the Gulf of Mexico and Canada.”

Anadarko can well afford to budget more this year following itsresults from 2000. It reported that for the fourth quarter 2000, ithad net income of $454 million, or $1.75 a share, up from 1999’slast quarter of $28 million or 22 cents a share. The resultsreflect the company’s merger with Union Pacific Resources, whichdoubled annual production levels and coincided with highercommodity prices on oil and gas.

Its Houston-based neighbor, Apache Corp., also announced recordearnings last week, and said it would spend about $1 billion —30% more — this year on exploration and development. Apacherecorded fourth quarter earnings of $252.2 million, or $2.04 ashare, which was 173% higher than the fourth quarter of 1999, whichhad earnings of $92.5 million or 81 cents a share. For the fullyear, Apache said higher prices and increased oil and gasproduction brought record earnings of $693.1 million, or $5.87 ashare. In 1999, Apache earned $186.4 million, or $1.73 a share.

Production for Apache continued its roll, which has seen a risein those levels for 23 consecutive years. It produced 260,196 boe/dand reserves surpassed 1 B boe, up 35% from year-end 1999. It added377 MM boe through acquisitions, drilling and revisions, andreplaced 396% of its production.

The earnings boom continues at Mitchell Energy & DevelopmentCorp., which said increased natural gas sales volumes and highercommodity prices contributed to its over-the-top report last week.Fourth quarter earnings for The Woodlands, TX-based company were$95.3 million, or $1.92 a share, compared with $34.5 million or$.70 in 1999.

A 30% increase in average natural gas sales to 341 MMcf/d anddoubled gas sales prices of $5.52/Mcf contributed to the higherearnings.

“Double-digit production growth is not only improving earnings,but is also creating shareholder value as the marketplacerecognizes our ability to substantially increase the reserve basefor the company,” said CEO George P. Mitchell. “We are one of onlya few companies that can say with full confidence that productionwill continue to grow significantly beyond 2001. In fact, with atleast 2,000 undrilled locations in the Barnett, we expect toincrease gas and natural gas liquids sales over the next threeyears at compounded interest rates exceeding 20% and 10%,respectively.”

Oklahoma City-based Devon Energy Corp. also set a record forproduction of oil and natural gas liquids and was boosted by higheroil and natural gas prices in its forth quarter and year-endreport. Record new discoveries and extensions, said the company,drove oil and gas reserves to a new high of 1.1 B boe. For thefourth quarter, net earnings were $306.9 million, or $2.37 a share,compared with 1999 fourth quarter earnings of $74.9 million or$0.50 a share.

For the year, Devon reported net earnings of $730.3 million, or$5.66 a share. Excluding its one-time costs of $60.4 millionassociated with its merger with Santa Fe Snyder Corp., earningswere even higher at $767.6 million, or $5.95 a share. The earningscompared with a net loss of $1.54.1 million or $1.68 a share in1999. In 2001, Devon is budgeting $1.1 billion in its capitalbudget — more than double 2000’s budget of $510 million.

With an aggressive drilling program that helped to replace 329%of its 2000 natural gas production, Houston-based Williams’exploration and production unit now plans to drill more than 300wells this year — a record number in a single year for thecompany — concentrating its talents in Wyoming’s Green RiverBasin and New Mexico’s San Juan Basin. Last week the Tulsa-basedcompany reported that at year’s end, its natural gas reservestotaled 1.20 Tcfe, up from 1999’s year-end total reserves of 1.05Tcfe. The unit replaced 329% of its 2000 production of 65.6 Bcfe.

Carolyn Davis

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