Flush with Cash, Independents Eye 2001 E&P
Record-breaking fourth quarter and year-end earnings have
created more opportunities for U.S. independents this year, which
now are flush with cash to ramp up North American exploration and
production projects and many U.S.-based independents now are
boosting capital spending in their E&P units to boost energy
reserves, especially natural gas.
Still not complete, the news from several independents last week
was impressive, with Anadarko Petroleum Corp. and Apache both
reporting record-breaking fourth quarters and plans to greatly
increase production and exploration in 2001. Mitchell Energy &
Development Corp. Pioneer Natural Resources Co., Devon Energy Corp.
and Williams also are setting their sights on eclipsing production
records set in 2000.
Anadarko is channeling $2.8 billion more into its capital budget
this year, a 65% increase, and most of the exploration will be in
North America. More than half of the swollen budget is for ongoing
development drilling to increase production from existing fields in
Texas, the Gulf of Mexico, the Rockies, Western Canada, the North
Slope of Alaska and Algeria.
Anadarko CEO Robert J. Allison Jr. said that the fatter budget
is directed toward finding more natural gas for North America.
"Natural gas is and will continue to be in tremendous demand in
North America. Therefore, the primary focus of this 2001 budget is
to find new natural gas reserves and increase gas production in the
Lower 48, the Gulf of Mexico and Canada."
Anadarko can well afford to budget more this year following its
results from 2000. It reported that for the fourth quarter 2000, it
had net income of $454 million, or $1.75 a share, up from 1999's
last quarter of $28 million or 22 cents a share. The results
reflect the company's merger with Union Pacific Resources, which
doubled annual production levels and coincided with higher
commodity prices on oil and gas.
Its Houston-based neighbor, Apache Corp., also announced record
earnings last week, and said it would spend about $1 billion ---
30% more --- this year on exploration and development. Apache
recorded fourth quarter earnings of $252.2 million, or $2.04 a
share, which was 173% higher than the fourth quarter of 1999, which
had earnings of $92.5 million or 81 cents a share. For the full
year, Apache said higher prices and increased oil and gas
production brought record earnings of $693.1 million, or $5.87 a
share. In 1999, Apache earned $186.4 million, or $1.73 a share.
Production for Apache continued its roll, which has seen a rise
in those levels for 23 consecutive years. It produced 260,196 boe/d
and reserves surpassed 1 B boe, up 35% from year-end 1999. It added
377 MM boe through acquisitions, drilling and revisions, and
replaced 396% of its production.
The earnings boom continues at Mitchell Energy & Development
Corp., which said increased natural gas sales volumes and higher
commodity prices contributed to its over-the-top report last week.
Fourth quarter earnings for The Woodlands, TX-based company were
$95.3 million, or $1.92 a share, compared with $34.5 million or
$.70 in 1999.
A 30% increase in average natural gas sales to 341 MMcf/d and
doubled gas sales prices of $5.52/Mcf contributed to the higher
"Double-digit production growth is not only improving earnings,
but is also creating shareholder value as the marketplace
recognizes our ability to substantially increase the reserve base
for the company," said CEO George P. Mitchell. "We are one of only
a few companies that can say with full confidence that production
will continue to grow significantly beyond 2001. In fact, with at
least 2,000 undrilled locations in the Barnett, we expect to
increase gas and natural gas liquids sales over the next three
years at compounded interest rates exceeding 20% and 10%,
Oklahoma City-based Devon Energy Corp. also set a record for
production of oil and natural gas liquids and was boosted by higher
oil and natural gas prices in its forth quarter and year-end
report. Record new discoveries and extensions, said the company,
drove oil and gas reserves to a new high of 1.1 B boe. For the
fourth quarter, net earnings were $306.9 million, or $2.37 a share,
compared with 1999 fourth quarter earnings of $74.9 million or
$0.50 a share.
For the year, Devon reported net earnings of $730.3 million, or
$5.66 a share. Excluding its one-time costs of $60.4 million
associated with its merger with Santa Fe Snyder Corp., earnings
were even higher at $767.6 million, or $5.95 a share. The earnings
compared with a net loss of $1.54.1 million or $1.68 a share in
1999. In 2001, Devon is budgeting $1.1 billion in its capital
budget --- more than double 2000's budget of $510 million.
With an aggressive drilling program that helped to replace 329%
of its 2000 natural gas production, Houston-based Williams'
exploration and production unit now plans to drill more than 300
wells this year --- a record number in a single year for the
company --- concentrating its talents in Wyoming's Green River
Basin and New Mexico's San Juan Basin. Last week the Tulsa-based
company reported that at year's end, its natural gas reserves
totaled 1.20 Tcfe, up from 1999's year-end total reserves of 1.05
Tcfe. The unit replaced 329% of its 2000 production of 65.6 Bcfe.