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Producers Go from Rags to Riches

Producers Go from Rags to Riches

After several years being hard up for cash because gas and oil were dirt cheap, producers are now rolling in the dough. Several more reported record financial results for the fourth quarter and full year last week because of extremely high natural gas and crude oil prices and rising production. EOG Resources, Louis Dreyfus Natural Gas and Equitable Resources all hit the jackpot with massive earnings increases from the year prior.

EOG Resources reported record fourth quarter and full year 2000 results with a 431% increase in 4Q net income to $158.7 million, or $1.36 per share, and a 570% increase in annual net income to $385.9 million, or $3.30 per share. EOG's 4Q production per share was up 11.1% and its annual production per share grew 7.6%. Its crude oil production increased 35.1% and natural gas liquids production rose 7.9%.

"Combined with record natural gas prices, our strong 2000 results reflect our success in delivering on EOG's long term strategy of being natural gas based, per share focused and rate of return driven," said CEO Mark G. Papa. "Year 2000 was outstanding for our shareholders. EOG's stock price appreciated 211%, ranking it third in the S&P 500 Index," he added.

EOG increased its proved reserves by 6% to 3,821 Bcfe by the end of the year. It also replaced 152% of production from all sources at a finding cost of $1.07/Mcfe.

Louis Dreyfus Natural Gas also announced record financial results for the quarter and year. Fourth quarter net income was up 304% to $50.9 million, or $1.15 per share, on total revenue of $174.4 million. Revenue rose 87% from 4Q99. Cash flow jumped by 156% in the fourth quarter to $131.8 million. Gas production averaged 347 MMcf/d, a 13% increase. The company's equivalent oil and gas production for the quarter increased 11% to 394 MMcfe/d compared to 355 MMcfe/d in 4Q99. In addition, the price realized for the company's gas production in the fourth quarter averaged $4.82 per Mcf, an increase of 97% compared to $2.45/Mcf in 4Q99. Oil prices averaged $30.67/bbl, a 46% increase.

For the year Louis Dreyfus reported a 359% increase in net income to $98.3 million, or $2.29 per share, on total revenue of $477.3 million, which was up 58%. Net income excluding the non-cash impact of SFAS 133 derivative accounting and nonrecurring impairment charges was $114.3 million, or $2.67 per share, for the year compared to $24.6 million, or $0.61 per share, for 1999.

"The strategic decision made 10 years ago to focus on building a large domestic natural gas reserve base is clearly paying dividends in the current natural gas price environment," said CEO Mark Monroe. "Last year, our proved reserve base grew 23% to 1.8 Tcfe, with 275 Bcfe added through drilling and 204 Bcfe added by acquisitions. Natural gas reserves comprised 89% of our total proved reserves, or 1.6 Tcf, continuing to secure our position as one of the largest natural gas companies in the U.S."

Equitable Resources reported a 71% earnings increase for the year to $114.1 million or $3.44/share and 51% growth for the quarter driven by increased production, prices and throughput. Equitable's stock price achieved 100% appreciation during 2000.

"Equitable Resources' record earnings performance in year 2000 is a significant milestone," said CEO Murry S. Gerber. "This achievement is tangible evidence of exceptional implementation of a strategy focused on building value from our core businesses. Equitable is considerably larger, more profitable and financially stronger than it was one year ago. As such we are better positioned competitively than at any time in our recent history."

Equitable's growth was led by its production segment, which showed a 120% increase in EBIT to $120.3 million for the year 2000. The positive results were due primarily to increased production attributable to the acquisition of Statoil's Appalachian oil and gas properties and higher commodity prices. Some of the improvement was offset by the merger of its Gulf business with Westport Resources, the results of which are no longer included with this segment, and the settlement of the Kentucky West labor situation.

"I am optimistic about earnings potential for the year ahead," said Gerber. "We are currently targeting diluted earnings per share growth of 35-40% over our 2000 recurring EPS of $3.44. This outlook assumes average Nymex gas prices of $4.00/MMBtu."

For 2001, Equitable expects 40 Bcfe of net equity gas sales, of which about 12.5 Bcfe has been hedged in the form of Nymex collars with an average floor of about $3.25/Mcf and an average ceiling of about $4.30/Mcf. About 6.6 Bcfe will be sold subject to a fixed price of about $4/Mcfe.

Rocco Canonica

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ISSN © 2577-9877 | ISSN © 1532-1266
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