High commodity price have sent profits soaring for both major producers and independents. Number one major Exxon Mobil Corp. reported nearly double the profits from a year ago, and fourth-ranked Conoco Inc. also jumped. Independents EOG Resources Inc. and Houston Exploration Co., meanwhile, attributed record earnings to not only prices, but robust domestic gas production.

Exxon, flush from recording the highest profits ever by a U.S. corporation in 2000 (see Daily GPI, Jan. 25), saw first quarter profits continue their ascent to $5 billion in the quarter, up almost 44% from a year earlier. It earned $1.43 per share compared 99 cents per share ($3.48 billion) for the same period of 2000. Excluding one-time gains and losses, the Irving, TX-based giant earned $1.44 per share, a 51% hike from $3.35 billion, or 95 cents a share in 2000. Thomson Financial/First Call analysts had estimated Exxon would learn $1.35 per share in the first quarter.

Most profit gains resulted from higher oil and gas prices — there was no large production increase in the quarter. Natural gas production actually was down to 12.15 Bcf/d from 12.01 Bcf/d, which company officials blamed on an Indonesian plant shutdown following fighting between government troops and separatist rebels in Aceh. Crude oil production was up only slightly, to 2.62 MM bbl/d from 2.6 MM bbl/d.

Exxon’s capital and exploration budget actually rose in the first quarter, up to $2.52 billion from $2.22 billion a year ago, with most of the increase directed toward oil and gasoline production. Net income also included an after-tax gain of $40 million related to asset sales required as part of Exxon’s takeover of Mobil.

Houston-based Conoco reported its first quarter earnings also jumped because of commodity prices. It earned $616 million, or 97 cents a share, compared with $391 million, or 62 cents a share a year earlier. First Call had predicted earnings averaging 92 cents a share. Conoco also reported revenue of $10.6 billion, up 22% from a year ago.

“We continued to hit on all cylinders in the quarter,” said Conoco CEO Archie W. Dunham. He said the company’s exploration unit, which mostly operates outside of North America, has “another exciting program planned this year, with 25 wildcat wells and nine appraisal wells scheduled to be drilled.”

On the U.S. side, Conoco’s upstream earned $324 million, up 179%, while its international upstream decreased 14% to $256 million. Net natural gas liquids processed increased 17%, reflecting the company’s acquisition in 2000 of the Empress natural gas processing plant in Alberta (see Daily GPI, March 3, 2000).

Domestic natural gas independent EOG Resources Inc. saw its first quarter earnings escalate fivefold, all related to higher commodity prices and increased production volumes in the United States. The Houston-based company reported net income of $212.5 million, or $1.79 a share, up from $38.8 million, or 33 cents a share for the first quarter of 2000. Operating revenues doubled to $597.3 million, up from $259.9 million. First Call had estimated EOG’s earnings to be about $1.59 for the first quarter.

“At a time when the industry as a whole is struggling to maintain flat gas production, EOG increased U.S. natural gas production by over 7%,” said CEO Mark Papa. “This demonstrates our ability to continue to grow our production organically.” As for the rest of the industry, “don’t expect to see any supply surprises this year or next year,” Papa said, predicting the industry as a whole would add no more than 1.5% to U.S. production. “Recent data from Texas and Oklahoma indicates production will be disproportionately low relative to rig count increases.”

Overall, EOG’s natural gas production in the first quarter rose 2.7% to 941 MMcf/d. Its North American production was up 4.2% to 821 MMcf/d, and U.S. production alone was up 7.3% at 704 MMcf/d. First quarter natural gas prices in North America averaged $6.91/Mcf compared to $2.47/Mcf in the first quarter of 2000. EOG is focused on an overall 4% organic gain in production for the full year 2001.

Houston-based independent Houston Exploration Co. reported record first quarter income of $47.3 million, or $1.55 a share, up from $8.4 million or 35 cents a share a year ago. Production in the first quarter was 22.8 Bcfe, a 15% increase over 2000’s first quarter production of 19.8 Bcfe. Most of the increased production was through the drill bit, said company officials, with the main focus in its core area, the Gulf of Mexico.

Houston Exploration will continue to focus its expertise in core operating areas,” said CEO William G. Hargett. “Our exploration and development program continues to support a strategy of growth through the drill bit, as evidenced by our record success of the past two years.”

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