Higher oil and gas prices spurred industry leaders ExxonMobiland Chevron to large leaps in fourth quarter ’99 earnings over thedepressed 4Q 1998.

The two companies reported fourth quarter realized U.S. naturalgas prices up about 50 cents/Mcf over 4Q 1998 and the full yearaverage up about 15 cents over 1998.

ExxonMobil’s U.S. 4Q 1999 average was $2.54/Mcf, compared to$2.02 in 4Q 1998. Its 1999 average was $2.23, above the $2.05 1998quarter.

ExxonMobil, reporting quarterly income for the first time as acombined company since the Nov. 30 merger, saw a 34% rise fromOctober through December 1999 from $2.7 billion or 77 cents/share,compared to $2 billion or 58 cents/share in the same 1998 quarter.

“Upstream results benefited from the continued increase in crudeoil prices, which were up over $12 per barrel from the fourthquarter of 1998, along with a 5% increase in liquids production.Higher North American natural gas prices and lower explorationexpenses also improved upstream earnings,” said ExxonMobil ChairmanLee R. Raymond.

Chevron’s 4Q 1999 U.S. gas price was $2.49/Mcf, up from $1.98 in4Q 1998. Its yearly U.S. average totaled $2.16/Mcf, up from $2.02in 1998.

Chevron’s fourth quarter results excluding special items were$819 million, 63% higher than 4Q ’98’s $503 million. Overall thecompany showed an 18% gain in 1999 over 1998 with earnings beforespecial items of $2.3 billion, up from $2 billion in 1998.

“The higher crude oil and natural gas prices increased 1999operational earnings in our exploration and production business by80%,” Chevron Chairman Dave O’Reilly said. “Average U.S. crude oilsales realizations for the year rose 41%, while our U.S. naturalgas realizations rose 7%. Earnings were further bolstered by a 2%increase in oil and gas production worldwide, partly the result ofour commitment to continue investment during the period of low oilprices in 1998 and the first half of 1999.” O’Reilly also said thecompany added oil and gas reserves during the year that totaledapproximately 105% of 1999 production – the seventh consecutiveyear that Chevron has added more than 100% of the year’s productionin reserves.

U.S. natural gas production was off slightly for Chevron, from1.7 Bcf/d in 1998 to 1.6 Bcf/d in 1999. ExxonMobil also reported aU.S. gas production decline from 3.1 Bcf/d in 1998 to 2.9 Bcf/d in1999. E-M’s totals for Canadian natural gas production showed anincrease in 1999 to 683 MMcf/d from 667 MMcf/d in 1998.

Chevron reported production start-up on its deepwater Gulf ofMexico properties – Genesis and Gemini. Gross oil-equivalentproduction from Genesis, operated and 57%-owned by Chevron, reached63,000 barrels per day by year-end. Gross oil-equivalentproduction from the 40%-owned Gemini project reached 35,000 barrelsper day. Evaluation of options is under way to develop a thirdGulf of Mexico deepwater project, Typhoon. Chevron is the operatorand 50% owner of Typhoon.

The company said it expected to begin production from itsdiscovery well (K-29) in the Fort Liard area of the NorthwestTerritories, Canada by May. Plans are being developed for theconstruction of production and transportation facilities. A secondsuccessful well (M-25) was completed in January 2000 and isexpected to begin producing in the fourth quarter 2000. Chevron isthe operator and has a 43% interest in both discoveries.

Chevron also said it would increase its investment in its28%-owned affiliate, Dynegy Inc., to maintain a comparablepercentage ownership once Dynegy merges with Illinova Corp.

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