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XTO Reports 30% Production Increase, Declining Rig Count

Mirroring the performance of the industry as a whole, XTO Energy Inc. said last week it is pulling larger amounts of gas out of the ground even as it trims the number of rigs it has in operation.

XTO reported 1Q2009 natural gas production of 2.23 Bcf/d compared with 1.71 Bcf/d in 1Q2008. Production of natural gas equivalents (2.73 Mcfe) natural gas liquids (18,303 bbls) and oil were also higher compared with 1Q2008, the company said. Overall 1Q2009 production was 2.73 Bcfe/d, up 29% compared with 1Q2008 production of 2.11 Bcfe/d. That production is coming from ever fewer rigs, CEO Keith Hutton told analysts on a conference call last Wednesday.

"We averaged 81 rigs in the fourth quarter, about 70 in the first quarter, and we'll average about 55 rigs this quarter," Hutton said.

The industry has seen the number of active gas-seeking rigs cut by more than half over the last year. A headlong plunge in the U.S. tally of active gas-seeking drilling rigs by the Baker Hughes Rotary Rig Count ( during most weeks in the last several months came to a near-halt in the week ending May 1 (see related story. Baker Hughes said one rig was added in the Gulf of Mexico, but that was offset by a loss of two onshore. Its latest count was down 8% from a month ago and 50% less than the year-earlier number.

Earlier this year Hutton said the rapid decline of the U.S. natural gas rig count -- especially in the prolific Barnett Shale -- pointed to a 3-5% drop in total U.S. volumes by the end of 2009 (see NGI, Feb. 23).

A recent analysis by Raymond James & Associates Inc. found that publicly traded U.S. natural gas producers continued to show gains in 4Q2008, boosting output by 3.5% year/year (y/y), despite disruptions from hurricanes Gustav and Ike (see NGI, March 30). The analysis showed remarkable growth by domestic gas producers in late 2008, which followed the record-setting pace in 3Q2008. Adding back the estimated offshore hurricane-related shut-ins reported by Minerals Management Service in 4Q2008, and assuming 65% was attributed to large, publicly traded producers, gas output jumped y/y "a staggering 8%," according to the analysis. A handful of the larger onshore gas producers -- including XTO -- drove the group's quarterly growth, the survey found.

XTO had one of the largest increases in NGI's 4Q2008 Top North American Gas Marketers Ranking with a 30% jump from 1.67 Bcf/d to 2.17 Bcf/d. Highlights of NGI's Top North American Gas Marketers Ranking for the full-year 2008 included XTO's 31% growth from 1.46 Bcf/d during 2007 to 1.91 Bcf/d for 2008.

The Fort Worth, TX-based independent last week increased its annual production growth target for 2009 from 14% to 16%. The company's estimated average daily production for the rest of the year was set at 2,698-2,728 MMcfe.

XTO reported 1Q2009 earnings of $486 million (84 cents/share) compared with 1Q2008 earnings of $465 million (93 cents/share).

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