Initial third quarter reports from producers are showing huge gains on higher commodity prices, a trend that is expected to continue in the coming days as the largest, including BP plc, Exxon Mobil Corp., ChevronTexaco Corp. and ConocoPhillips, issue their financials. However, oil and gas production has not been as strong — especially in North America — and once the numbers are complete, analysts are forecasting a natural gas sequential decline of 1.5-2% in North America, leading to U.S. supply falling 5% this year.

The next big report will come Tuesday, when the world’s second biggest energy concern after Exxon, London-based BP plc, is expected to post a 33% year-over-year jump in third quarter profit. The boost will come, according to BP, from continued high commodity prices and expanding refining margins. Its reporting period also will include a month’s worth of production from the 50% owned Russian subsidiary, TNK-BP.

However, BP’s oil and gas output is expected to be flat-to-slightly lower for the quarter, a trend that is showing across the board, according to Lehman Brothers analyst Thomas Driscoll. In an early 3Q report on North American gas volumes issued on Friday, Driscoll sees gas production falling sequentially from the second to the third quarter. Overall, he said, North American gas production volume will decline this year 2-3% — forcing industrial and perhaps utility customers to reduce gas consumption through the rest of the year.

Lehman’s survey includes producers that account for about 70% of North American production volumes, grossed up for royalties With 24% of the U.S. survey complete (49 companies), he said U.S. production fell 2-2.5% sequentially and 3-3.5% versus 3Q02. Canadian gas production is expected to be flat sequentially, and may decline 2.5-3% from the same period a year ago, he said.

Driscoll bases his belief that the U.S. gas supply will fall 5% this year on several factors, including:

Companies that are forecast to have the largest gas declines in 3Q are ATP Oil & Gas, 43%; Amerada Hess, 39%; and Nuevo Energy, 28%. Also forecast to show double-digit declines for the quarter are El Paso, 17%; Swift Energy, 16%; Shell, 15%; Kerr-McGee and Williams, 14%; and Unocal, 12%.

Pioneer Natural Resources is again forecast to show huge gas production gains, up 109%, while other gainers include Apache Corp., 46%; Westport, 45%; Chesapeake Energy and EnCana, 31%; Nexen, 27%; and XTO Energy, 26%.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.