Lower natural gas prices in the last three months of 2006 made a dent in the earnings of three of the top oil and gas majors, but ExxonMobil Corp., Royal Dutch Shell and Chevron Corp. still reported record annual earnings in 2006. Gas production at ExxonMobil and Shell fell last year, but Chevron recorded a 9% boost to its U.S. output following restorations in Gulf of Mexico (GOM) infrastructure following the 2005 hurricanes.

In the United States, Irving, TX-based ExxonMobil reported gas production available for sale totaled 1,588 MMcf/d, down from 1,620 MMcf/d in 4Q2005. In Canada, ExxonMobil’s gas output dropped to 818 MMcf/d from 912 MMcf/d. Worldwide, gas production fell to 9,301 MMcf/d from 9,822 MMcf/d.

“Lower European demand and the impact of mature field decline were partly offset by higher volumes from projects in Qatar and the absence of 2005 hurricane effects,” ExxonMobil said in a statement.

ExxonMobil posted a $9.84 billion profit, excluding a tax gain, in 4Q2006. Net income at ExxonMobil fell to $10.3 billion from $10.7 billion in 4Q2005. Earnings from ExxonMobil’s U.S. upstream operations in the quarter were $1.052 billion, $735 million lower than in 4Q2005. Upstream earnings, excluding special items and excluding U.S. earnings, were $5.168 billion, down $83 million from 2005. Full-year profit of $39.5 billion broke ExxonMobil’s U.S. record for net income by any company.

Chevron on Friday reported worldwide oil-equivalent production was 2.66 million boe/d in 4Q2006, about the same as the in the final quarter of 2005. In the United States, net production of 763,000 boe/d increased 6% from a year earlier, mostly because of restoration to volumes following the 2005 hurricanes. The net liquids component of production was up 5% to 466,000 boe/d. Net natural gas production was 9% higher at 1.8 Bcf/d.

Chevron’s 4Q2006 profit stumbled, falling 9%, but it still ended 2006 with its third consecutive year of record earnings. The San Ramon, CA-based producer said it made $3.77 billion ($1.74/share), down from $4.14 billion ($1.86) in 4Q2005. The profit decline was Chevron’s first in more than a year. For the full year, Chevron earned $17.1 billion, easily exceeding the $14.1 billion it made in 2005.

Declining gas prices took a big bite out of Chevron’s income in the final quarter. The company said its average price for natural gas sold in the United States fell 42% to $5.90/Mcf. Gas prices in 4Q2005 soared when hurricanes Katrina and Rita damaged Gulf of Mexico infrastructure and created supply shortages.

“Fourth quarter earnings benefited from an improvement in the operating performance of our oil and gas fields and refineries, especially in the United States,” said Chevron CEO Dave O’Reilly. “However, this benefit to earnings was more than offset by the effect of a sharp decline in U.S. natural gas prices from a year earlier.”

Shell, headquartered in The Hague, did not break out its North American gas production separately. In the final quarter, Shell’s gas production available for sale worldwide totaled 8,377 MMcf/d, which was about 5% less than in 4Q2005. For the year, Shell’s gas production rose about 1% to 8,368 MMcf/d from 8,262 MMcf/d.

Shell CEO Jeroen van der Veer said the company would drive its upstream investments this year toward a “combination of exploration, LNG [liquefied natural gas] and unconventionals.” He said Shell has implemented a deliberate policy of investing in large stakes in major integrated projects. As part of the funding for that policy, we expect asset sales to accelerate in 2007 to some $9 billion, as we continue to refocus our company. Taken together with the purchase of the minority shares in Shell Canada Ltd., I therefore anticipate that net capital spending will be around $22-23 billion in 2007, compared to some $21 billion in 2006.”

Shell, which already owns about 78% of Shell Canada, is offering to buy out the remaining stake for C$45/share, which represents a value of about C$8.7 billion (see NGI, Jan. 29).

Shell reported profit, excluding special items, reached $5.5 billion for the quarter. Net income jumped 21% to $5.28 billion from $4.37 billion in 4Q2005. Full-year net income was $25.4 billion.

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