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XTO Raises Annual Production Forecast on Record 1Q Output, Earnings

XTO Energy Inc. said Wednesday it now expects to exceed last year's natural gas and oil production by 24-26%, after reporting record output in the first quarter.

The Fort Worth-based independent topped records in each of its production components, with gas and oil production up 34% to 1.199 Bcfe/d, compared with 893 MMcfe/d in 1Q2004. Gas production averaged 922 MMcf/d, up 19% from 771 MMcf/d in 1Q2004. Oil production was 35,627 bbl/d, a 164% increase from 1Q2004's 13,470 bbl/d. Natural gas liquids (NGL) production reached 10,584 bbl/d, a 56% increase from 6,766 bbl/d.

XTO also exceeded previous revenue records in the quarter, reporting $628.9 million, a 59% increase from $394.8 million in 1Q2004. Earnings were $166.3 million (48 cents/share), compared with 1Q2004 earnings of $94.1 million (30 cents). The 1Q2005 earnings include the effects of a derivative fair value loss and non-cash incentive compensation, and excluding these items, earnings were $190.7 million (55 cents/share), compared with $119.1 million (38 cents) a year earlier.

"Our disciplined strategy of growth -- premium acquisitions and a measured pace of development drilling -- continues to deliver record results for our shareholders," said CEO Bob R. Simpson. "With production up 34% year-over-year, the company's revenues, earnings per share and operating cash flow increased by 59%, 60% and 55%, respectively, marking one of the best financial performances in our history." Simpson noted that going forward, XTO has built a four- to five-year development inventory of more than 4,000 drilling locations.

In its increased production guidance, XTO estimated ranges of average daily production going forward at 1-1.015 Bcf/d in 2Q2005, and 1.04-1.07 Bcf/d for the first six months of this year. Total gas equivalent production is estimated at 1.252-1.282 Bcfe/d in 2Q2005 and 1.292-1.337 Bcfe/d for the first six months. XTO also increased its development budget to $935 million from $850 million.

"Once again, this quarter highlights XTO's strong production performance," said President-Elect Keith A. Hutton. "We exceeded the high end of guidance by 2%, with a portion of natural gas growth volumes shifting into the NGL category. Moving forward, our drilling and workover efforts are providing solid production growth momentum across the board.

"In our eastern region, daily production from the Freestone Trend increased to more than 470 MMcf as the infrastructure to upgrade take-away capacity to 730 MMcf nears completion," Hutton said. "With drilling activity just begun, the company's daily oil production has increased by more than 2,000 bbl since last quarter. Finally, with the closing of the Antero acquisition (see NGI, Jan. 17), XTO becomes a top producer in the Barnett Shale with 125 new wells planned for 2005. Altogether, the company has 53 drilling rigs active and expects to deliver 24-26% production growth this year."

For the year, XTO's realized natural gas prices are expected to be 60-70 cents below the New York Mercantile Exchange Henry Hub price, assuming a $6.50/Mcf gas price and before hedging activities. Natural gas liquids prices are expected to be about 55-65% of the average Nymex oil price. The company's realized oil prices should be about $3.00-4.00 below the average Nymex price, assuming a $45.00/bbl price and before hedging activities.

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