With few exceptions to the rule, U.S.-based producers reported soaring 3Q income over a year ago, however, U.S. natural gas production for most continued to decline, and capital spending on exploration and production dropped for some of the largest operators. Notable exceptions were EOG Resources and Pioneer Natural Resources, which both posted strong, positive natural gas gains in North America.

Irving, Texas-based ExxonMobil Corp., the world’s largest producer, reported that quarterly profit was up 56% on high commodity prices and strong results from worldwide refining operations. Net income for the third quarter was $5.68 billion (88 cents/share), from $3.65 billion (55 cents) in 3Q2003. Excluding a $550 million charge to cover exposure in a lawsuit brought by thousands of gas station dealers, 3Q earnings would have set a quarterly record of $6.23 billion. Revenue also jumped 28% to $76.38 billion from $59.84 billion.

Worldwide, the major’s production inched up slightly, 1% over a year ago, with growing oil production from overseas fields partially offsetting declines in older fields. Gas production also edged slightly upward by 1.3% to 8.43 Bcf/d from 8.32 Bcf/d in 3Q2003, also on higher overseas volumes. However, the story was not as good in North America. In the United States, gas production fell to 1.877 Bcf/d from 2.179 Bcf/d, while in Canada, it dropped to 954 MMcf/d from 943 MMcf/d.

Also troubling to some analysts is Exxon’s capital spending for exploration, which declined by 5.5% in the quarter over a year ago to $3.63 billion from $3.84 billion. Exxon said new exploration is difficult in many areas of the world, and where it can more easily explore, like in North America, the fields are in decline.

San Ramon, CA-based ChevronTexaco Corp. reported a 62% increase in its quarterly profit to $3.2 billion ($1.51/share), from $1.98 billion ($1.01) for the same period of 2003. The latest results included $486 million (23 cents) on the sale of nonstrategic assets. Revenue also rose 32% to $40.72 billion from $30.84 billion.

However, worldwide oil equivalent production fell 6% over a year ago. About two-thirds of the decline was associated with asset sales, while the rest followed the shut-ins in the Gulf of Mexico (GOM) because of storms late in the quarter. Damage from Hurricane Ivan is expected to restrict 4Q production by 50,000-60,000 boe/d.

Despite the strong commodity prices — and an increase in global upstream spending — net oil-equivalent production declined 13%, or 116,000 boe/d from 3Q2003. Net natural gas production averaged 1.8 Bcf/d, down 15%. Excluding the lower production attributable to properties sold since 3Q2003 and the effect of hurricanes, net boe declined about 7%, the company said. This decrease resulted mainly from normal field declines, the effects of which were only partially offset by new or increased production in certain fields. On this basis, net liquids declined 6% and net natural gas production declined 9%.

In the United States, Chevron spent $434 million for exploration and production, up from $378 million a year earlier. However, the company only gained 1.8 Bcf/d in net gas production in the United States, compared with 2.1 Bcf/d in 3Q2003. Worldwide, gas production fell to 3.7 Bcf/d from 4.1 Bcf/d.

Houston-based Anadarko Petroleum Corp. reported net income of $399 million ($1.58/share), compared with $274 million ($1.09). Net income for the current quarter included costs associated with repurchasing debt and the sale of non-core properties, which amounted to $74 million (29 cents/share). Cash flow from operating activities totaled $992 million, compared with $884 million a year ago.

During the quarter, sales volumes totaled 49 MMboe, or 534,000 boe/d, down from 50 MMboe or 541,000 boe/d because of “high natural decline rates on properties that are currently being divested.” Anadarko’s volumes also were reduced an estimated 200,000 boe by hurricane-related shut-ins in the GOM. However, sales were up more than 4% sequentially from the second quarter following the start-up of Anadarko’s Marco Polo field in the deepwater GOM, continued drilling success in East Texas and North Louisiana tight gas plays and the timing of sales in Algeria.

In the United States, gas volumes in the quarter fell to 132 Bcf, or 1.4 Bcf/d, compared with 136 Bcf, or 1.48 Bcf/d in 3Q2003. In Canada, however, volumes rose to 35 Bcf, or 385 MMcf/d, from 33 Bcf, or 357 MMcf/d. Worldwide capital spending totaled $710 million, up from $566 million a year ago. The costs were not broken down by region.

Houston-based Apache Corp. reported record earnings of $432 million ($1.31/share), up 57% from $276 million (84 cents). Apache credited a combination of continued strong commodity prices as well as record oil production. Quarterly earnings were reduced by 6 cents/share because of the impact of foreign currency swings on deferred taxes and by 4 cents/share because production was curtailed by Hurricane Ivan.

Worldwide daily production averaged 458,412 boe, up 2%. Higher production in Australia, the North Sea and China more than offset the impact of Hurricane Ivan, which reduced Apache’s U.S. oil production by 4,042 bbl/d. Natural gas production averaged 1.23 Bcf/d, down about 30 MMcf/d from a year ago and about 20 MMcf/d lower sequentially from the second quarter.

U.S. gas production fell to 640,467 Mcf/d from 717,988 Mcf/d in 3Q2003. In Canada, gas production was higher, at 325,535 Mcf/d, compared with 319,522 Mcf/d. Apache also increased its North American exploration budget from a year ago, spending $380,000 on U.S. and Canadian projects, compared with $240,000 a year earlier.

Unocal, headquartered in El Segundo, CA, more than doubled its quarterly profit from a year go, but its production numbers were not as stellar. Quarterly income was $330 million ($1.23/share), from $152 million (58 cents). Excluding one-time items, Unocal’s adjusted income of $294 million ($1.09), which beat Thomson First Call analysts’ forecast of 96 cents.

Worldwide hydrocarbon liquids and natural gas production averaged 407,000 boe/d, compared with 441,000 boe/d in 3Q2003. Unocal blamed the decline on the sale of oil and gas assets in North America, which accounted for nearly 27,000 boe/d in 2003, Hurricane Ivan, which reduced production by 2,400 boe/d, natural declines in North America and lower contractor’s cost recovery barrels in Asia. Unocal currently expects worldwide production for the full-year 2004 to exceed 405,000 boe/d.

U.S. gas production fell to 486 MMcf from 644 MMcf a year earlier. In Canada, gas production for the quarter was 83 MMcf, compared with 90 MMcf. Unocal also spent less on exploration and production in North America compared with a year ago. Overall, the company spent $112 million, down from $114 million a year ago.

ConocoPhillips 3Q profit jumped 53% over a year ago, helping the Houston-based producer drive down its debt, invest in capital projects and pay higher dividends. Earnings were $2 billion ($2.86/share), compared with $1.31 billion ($1.90) in 3Q2003. Revenue jumped 31% to $34.7 billion from $26.49 billion. Conoco generated $4.4 billion in cash from operations, and it invested $1.6 billion in capital projects and paid $296 million in dividends.

Production was down 5% sequentially from the second quarter. Increased output from Bayu-Undan in the Timor Sea was “more than offset” by the impact of scheduled maintenance in Alaska and the North Sea, as well as normal seasonal declines. Sales volumes were down slightly, which Conoco attributed to asset sales and scheduled maintenance. Conoco expects full-year 2004 production to average about 1.56 MMboe/d.

On the natural gas side, Conoco’s U.S. production was down slightly from a year ago, producing 1.38 Bcf/d, compared with 1.45 Bcf/d. Canadian gas output also was lower, with 425 MMcf/d, down from 448 MMcf/d a year ago. Worldwide, gas output was 3.18 Bcf/d, down from 3.38 Bcf/d in 3Q2003.

EnCana Corp., based in Calgary, reported sales growth of more than 22% to 781,000 boe/d, a 40% increase to cash flow to $1.36 billion ($2.92/share diluted) and doubled operating earnings to $559 million ($1.20) over a year ago. Quarterly gas sales were up 24% over a year ago, to 3.13 Bcf/d.

“The increase was mainly driven by strong organic sales growth from resource plays at Greater Sierra, Cutbank Ridge and Southern Plains shallow gas in Canada and Mamm Creek in the U.S. Rockies, plus the acquisition of Tom Brown Inc., which added an average of 275 MMcf/d during the quarter,” said CEO Gwyn Morgan.

EnCana is “on track” to achieve its 2004 sales guidance of between 725,000-765,000 boe/d, which at the midpoint is a 15% increase from 2003 sales volumes. Projected sales are comprised of between 2.95-3.05 Bcf/d and between 235,000-255,000 bbl/d of oil and natural gas liquids.

Oklahoma City-based Kerr-McGee Corp. reported record production in the quarter, averaging 341,600 boe/d, a 33% increase over a year ago. Higher volumes were attributed to Bohai Bay, China oil production, gas production from the company’s new deepwater Gulf of Mexico hub Red Hawk, and a full quarter of production from its Westport Resources acquisition.

Natural gas sales averaged a record 1.051 Bcf/d, up 50% from a year ago. Oil output averaged 166,400 bbl/d, up 18% from 141,000 bbl/d in 3Q2003.

Kerr-McGee’s net income was down because of special items to $7.4 million (5 cents/share), compared with $28.8 million (29 cents). Adjusted after-tax net income from continuing operations was $177.4 million ($1.17), compared with $76.7 million (76 cents). Special items after taxes in 3Q2004 included a $79.6 million write-down related to a chemical plant, higher environmental charges of $19.7 million and higher non-hedge commodity and derivative losses of $24.1 million.

Houston-based EOG Resources increased its full-year production growth target to 9.5% from 9% on the strength of 12% production growth in the third quarter. The company reported income of $169.6 million ($1.42/share), from $114.7 million (99 cents) a year ago.

North American production increased more than 7%, while production from Trinidad and UK operations increased 38%. In the United States, EOG said the most significant increases came from the Rocky Mountain and South Texas areas. Gas production increased in the Rockies from successful drilling results in Wyoming’s Moxa Arch and Utah’s Uinta Basin. EOG also reported increased oil production from the horizontal Bakken play in Montana.

Pioneer Natural Resources, headquartered in Houston, reported net income of $80.9 million (67 cents/share), a drop from $191.8 million ($1.62) in 3Q2003. Pioneer said the quarterly results included an 8 cent/share after-tax impairment charge related to the company’s decision to not pursue development of the Olowi field in Gabon. Also, the company said, “the significant year-to-year change in net income is principally attributable to the company’s reversal of its deferred tax valuation allowance in the U.S. during the third quarter of 2003.”

Expecting the charges, Wall Street analysts, on average, had expected the company to post earnings of 65 cents/share.

However, quarterly oil and gas sales were up, averaging 180,020 boe/d. Gas sales averaged 676 MMcf/d. U.S. gas sales were 499,012 Mcf, up from 487,000 Mcf. In Canada, however, gas sales were down at 38,837 Mcf, from 41,253 Mcf in 3Q2003.

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