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Rockies Exploration Boosts Noble, Western Gas Output, Earnings

February 27, 2006
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Noble Energy Inc., which acquired Rocky Mountain-focused Patina Oil & Gas Corp. last May, reported a 36% increase in 2005 year-end oil and natural gas output and a near doubling of its annual income. Meanwhile, Western Gas Resources Inc., which last year picked up more Rockies assets and began coalbed methane (CBM) exploration in western Canada, reported output jumped 14% last year, and income rose 60%.

Houston-based Noble on Thursday reported quarterly income of $221.9 million ($1.27/share) on cash flow of $460.2 million, compared with 4Q2004's $87.4 million (74 cents) on cash flow of $190.2 million. For the year, Noble reported net income of $645.7 million ($4.20/share) from $328.7 million ($2.82) in 2004.

"This past year marked the beginning of an important new era at Noble Energy," said CEO Charles Davidson. "In May, we completed our acquisition of Patina, bringing our domestic and international reserves into balance while adding a large, stable source of domestic production and resource growth for years to come. In North America, production at our deepwater Swordfish development began in October, the first of three deepwater projects that will add substantial new production in 2006.

"Also in North America, new resource developments in the Piceance and Wind River basins in the Rocky Mountains, along with our continuing success in Wattenberg and Buffalo Wallow programs, are adding to our already substantial onshore production," said Davidson.

Production for the year increased 36% to 144,897 boe/d from 106,536 boe/d. Domestic production increased 21,434 boe/d, or 35%, to 83,266 boe/d, mostly because of the acquisition of Patina (see NGI, June 6, 2005). As a result of hurricanes in the Gulf of Mexico, average production for the full year was reduced by 6,700 boe/d. Fourth quarter production increased 56% to 165,186 boe/d from 105,996 boe/d a year earlier. In the final quarter, estimated shut-in production from hurricanes totaled 17,662 boe/d. "Had it not been for shut in production, company-wide production would have shown an increase of 73% over last year," the company said.

Noble's North American 4Q production increased to 100,034 boe/d from 4Q2004's 56,926 boe/d. The average liquids price was $52.72/bbl; the average realized natural gas price was $8.83/Mcf. Noble drilled 529 net North America wells in 2005, of which 27 were drilled in the Southern region, 375 in the Rocky Mountains and 127 in the Midcontinent. The company also completed 431 refraction and recompletion projects during this period, primarily in the Wattenberg field.

Also Thursday, Denver-based Western Gas reported a 125% increase in 4Q2005 income, to $135.7 million ($1.76/share) from $60.2 million (80 cents) in 4Q2004. For the year, the producer had a 60% increase in net income, to $203.8 million ($2.67/share) on revenues of $3.96 billion, compared with $127.8 million ($1.73) on revenues of $3.08 billion in 2004.

Last year, the company's gas-rich net production increased 14% to 63 Bcfe, averaging 172.6 MMcfe/d. Among other things, Western Gas acquired some Green River Basin assets in Wyoming, adding to its extensive western assets, and it began CBM exploration in the Western Canadian Sedimentary Basin (see NGI, Feb. 28, 2005; Aug. 1, 2005).

Natural gas equity production sold was 63.4 Bcfe in 2005, or 173.8 MMcfe/d. Gas throughput volumes at the company's gathering and processing facilities increased 4.5% in 2005 and averaged 1.42 Bcf/d. Total gas sales volumes marketed, including equity gas production, gas produced at the company's plants and gas purchased from third parties for resale, averaged 1.17 Bcf/d in 2005. Average gas prices increased 33% to $7.46/Mcf, compared with $5.59/Mcf in 2004.

"Fourteen percent production volume growth, 5% processing volume growth, high commodity prices and our low-cost structure delivered our shareholders a record year in 2005 for earnings and cash flow," said CEO Peter Dea. "We expect this momentum to carry into 2006 with even higher production and throughput growth, as we plan to participate in a record number of new wells in the Pinedale Anticline, while Big George coal continues to ramp up and our new 200 MMcf/d Oklahoma processing plant commences operations in the second quarter."

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