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Mitchell Results Set 3-Year Record

Mitchell Results Set 3-Year Record

Things are looking up at Mitchell Energy & Development Corp. at a time when the company is up for potential sale. Mitchell reported third quarter net earnings of $29.5 million versus a loss of $3.7 million in the prior-year period. The current quarter's results included a $5 million ($3.1 million after-tax) reversal of previous litigation provisions. Excluding the reversal, earnings increased $30 million compared with the prior-year period, primarily due to significantly higher energy prices and lower operating expenses. These positive factors were partially offset by the adverse impact of natural gas and natural gas liquids production curtailments in early August associated with a six-day shutdown of the Bridgeport gas processing plant for maintenance and equipment upgrades.

"These are the best quarterly earnings we've had during the last three years," said CEO George P. Mitchell. "While higher commodity prices certainly were the largest contributor, financial results also benefited from cost-cutting measures implemented late last year."

Mitchell, The Woodlands, TX, is one of the country's largest independent producers of gas and gas liquids. In October, Mitchell's board of directors hired Goldman, Sachs & Co. and Chase Securities Inc. to help weigh strategic alternatives, including a sale or merger (see Daily GPI Oct. 7). Mitchell said it would not comment until a decision is made.

"Operationally, accelerated development of the Barnett Shale play in North Texas using 'light sand' fracture technology is beginning to add significantly to our natural gas production. We stepped up drilling in the Barnett during the summer, and net gas production from the Barnett has increased from 74 MMcf/d to more than 90 MMcf. We plan to add a fifth rig there next month and also a third rig in the North Personville area of East Texas. Company-wide, natural gas sales are already running 250 MMcf/d, ahead of the target we set back in the summer. With a backlog of excellent drilling opportunities in our major fields, we expect to increase natural gas sales by more than 10% annually over the next several years.

"In gas processing, operating improvements, increased drilling activity behind our plants and the recent purchase of the outstanding 50% interest in the Jameson plant have combined to push current NGL production to almost 52,000 barrels per day. Given the positive outlook for energy prices and expected growth in both natural gas and NGL volumes, earnings should continue to be strong into next year."

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