A survey of second quarter financial reports from 25 producersreveals a 0.5% decline in U.S. gas production compared to 2Q99. Outof 25 producers, fourteen reported lower production and basinexploration. Pioneer Resources, Ocean Energy, Union Pacific andKerr McGee showed the largest U.S. production declines.

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 upsubstantially during the quarter with the majority of producers inthe survey reporting dollar-plus increases. The average of all ofthe 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 yearago, I think it reflects the struggle out here that companies haveto grow domestic production,” explained analyst Robert Morris,Salomon Smith Barney “Budgets for most companies out there thisyear, still are well below what they will cash flow. We are goingto start to see production come up, but we are a long way fromgetting back to where we were at the beginning of 1999. I thinkthings will continue to be tight for quite some time here.”

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

“We will probably pull our data together before the next reportthat we send out, mainly because there is not a large enough sampleyet to be sure of what it says,” said WEFA Energy Services’ VicePresident, Ron Denhardt. “The one thing that I am always concernedabout is that one or two large producers can make a hugedifference.”

Natural gas drilling went up by 28 rigs this week from the previoushigh of 736 to hit another peak at 764 active rigs in North America(see Daily GPI, July 24). That’s 266more 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 seeingsome upswing, or increase in production,” said Morris.”That wasnot apparent in the second quarter because we only recently here inthe third quarter got the rig count well above 650. There is somelag time.”

This study includes a cross-section of small and large producersoperating within the United States. Results may be affected bymergers, buy-outs, and company size.

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



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