It was nothing but good quarterly financial news for both majors and many of the large U.S.-based independent producers last week, which attributed their substantial earnings increases in most cases to higher commodity prices. However, production numbers were not as keen, especially for domestic operations, with only a handful of companies offering positive news for natural gas and oil-equivalent volumes.
Lehman Brothers’ 3Q production survey was about 66% complete on Friday, and analyst Thomas Driscoll is estimating that North American gas production fell 2.3% sequentially from the second quarter. The end result of lower production, he said, is that it “will force industrial and perhaps utility customers to reduce gas consumption in 2003.”
Preliminary estimates now put full-year 2003 gas production 2.5% lower in the United States and 3.2% lower in Canada — revised up from an earlier Lehman forecast that predicted a 2% year-over-year U.S. loss and a 3% decline in Canada. Overall, Lehman’s gas model shows a 5% supply decline in the United States this year, which includes the forecasted production decline, a 10% decrease in projected imports from Canada and a net annual storage increase of 83 Bcf, or 0.2 Bcf/d.
Exxon Mobil Corp. missed Wall Street’s quarterly expectations by 7 cents/share, and the world’s largest energy company also reported a 3% drop in oil and gas production — despite higher upstream spending. The Irving, TX-based producer reported a 38% hike in quarterly net income to $3.65 billion (55 cents/share), an increase of $1.01 billion over 3Q02. Thomson First Call had forecast earnings of 62 cents/share. Worldwide, Exxon Mobil’s quarterly natural gas production was down sharply from a year ago, to stand at 8,268 MMcf/d, compared with 9,222 MMcf/d for the same period a year ago. In the United States, gas production for sale declined in the quarter to 2,124 MMcf/d, compared with 2,374 MMcf/d for 3Q02. In Canada, production dropped to 943 MMcf/d from 1,020 MMcf/d a year ago.
BP plc, based in London, reported its $2.87 billion of third quarter earnings were 25% higher than the $2.3 billion reported a year ago, but below Wall Street’s expectations, which had expected a 33% gain in earnings. Quarterly production was up by more than 1.5% at 3.5 MMboe/d, compared with a year ago. Gas sales volumes also continued to grow in the third quarter at BP, now the North American leader, according to Intelligence Press statistics. In the United States, BP sold 11,809 MMcf/d in the third quarter, up from 9,332 MMcf/d in 3Q02, and up from 10,441 MMcf/d in the second quarter of 2003. Total gas sales volumes worldwide were 25,477 MMcf/d, compared with 21,050 MMcf/d in 3Q02. ChevronTexaco Corp., based in San Ramon, CA, reported net income of $1.975 billion, compared with a net loss of $904 million in the year-ago period. However, production numbers were down — 9% in the United States and 3% worldwide. Domestically, the major’s net oil-equivalent production declined 9% to 86,000 boe/d from the same period a year ago. The decline, said the company, resulted primarily from normal field declines and the absence of about 10,000-15,000 boe/d that it had deemed uneconomic following storm damages in the Gulf of Mexico late last year. The net liquids component of production was down 7% to 561,000 bbl/d. And in the United States, net natural gas production averaged 2.1 Bcf/d, down 11%.
Unocal, headquartered in El Segundo, CA, reported net earnings in the third quarter of $152 million (58 cents/share), compared with $99 million (41 cents) for the same period a year ago, and higher commodity prices were offset partially by lower North America natural gas and liquids production, reduced earnings from the company’s minerals operations, and increased administrative and general expenses. Unocal said its lower North America production was mostly because of natural reservoir declines and the impact of asset dispositions during the first nine months this year. Worldwide, Unocal’s consolidated net daily production in the third quarter averaged 441,000 boe/d, down from 466,000 boe/d in 3Q02.
Houston-based ConocoPhillips blamed seasonal declines, asset sales and scheduled maintenance for its production shortfall in the third quarter, which could not its strong match income gains. The company earned $1.31 billion ($1.90/share), compared with a loss of $116 million (minus 24 cents) in 3Q02. In last year’s third quarter, Conoco and Phillips had only been merged for one month. The earnings surged past Wall Street’s estimate of $1.59/share. Daily production averaged 1.56 MMboe/d, including Canadian Syncrude. Part of the decline followed the sale of about $400 million worth of assets in the quarter, which upped its total sales for the year to $750 million. The dispositions, together with others expected to be sold in the fourth quarter, represent a production rate decrease of approximately 50,000 boe/d.
EnCana Corp., North America’s largest independent, continued to grow its oil and gas sales, combined with strong commodity prices, generated cash flow of C$1.4 billion (C$2.81/share) in the third quarter, up 32% from C$1.02 billion a year ago. Earnings were C$400 million (C82 cents), up 96% from 3Q02’s C$204 million. Oil, NGLs and natural gas sales, excluding Syncrude, averaged 745,000 boe/d, up more than 9% compared with sales of 682,000 boe/d in 3Q02. Daily natural gas sales increased more than 10% to average 2.96 Bcf, compared with 2.69 Bcf a year ago. EnCana CEO Gwyn Morgan said the company is on track to grow 10% organically this year. He said EnCana is showing strong production increases in the fourth quarter, putting it on a pace to achieve sales in the midpoint of its 2003 guidance, which is between 740,000 and 797,000 boe/d.
Anadarko Petroleum Corp.’s CEO Robert J. Allison Jr. said Friday that he expects the company to report record earnings this year after a major cost-cutting program, better-than-expected performance from exploration and production operations and higher realized commodity prices. The company’s net income after unusual charges rose 47% for the quarter to $1.09/share and 95% for the first nine months of the year to $3.92/share. Total North American natural gas production during the quarter was up 4.2% to 1,838 MMcf/d and realized gas prices soared 72% to $4.51 from $2.62/Mcf in 3Q02. U.S. gas production was up 8% to 1,481 MMcf/d but Canadian gas production fell 8.2% to 357 MMcf/d, the company reported. It’s total worldwide oil production fell 1% to 189,000 b/d but realized crude oil prices rose $2.34 to $26.36.
Oklahoma City-based Kerr-McGee Corp.‘s cash flow was up 14% from a year ago, which came despite the sale of non-core assets this year, which represented about 15% of last year’s oil and gas production volumes. Daily production averaged 141,000 boe, versus 192,900 boe in 3Q02. Third quarter daily sales of natural gas averaged 699 MMcf, down from 789 MMcf for the same period of 2002. The average sales price, including the effects of the company’s hedging program, was $4.20/Mcf, a 51% increase from the 2002 third quarter.
Amerada Hess Corp., headquartered in New York City, saw its 3Q production average 339,000 boe/d, down from 441,000 boe/d in 3Q02. Nearly half of the lost production followed asset sales, Hess said. The average U.S. gas selling price, including the effect of hedging, was $3.53/Mcf in the quarter, up 6 cents for the same period a year ago. Hess overcame year-ago losses, with third-quarter net income of $146 million, compared with a net loss of $136 million in 3Q02. In 3Q02, Hess had an after-tax impairment charge of $207 million ($318 million before income taxes).
Chesapeake Energy reported massive increases in net income and production for the quarter and the first nine months of the year. Its quarterly net income soared to $1.15/share from 30 cents per share in 3Q02 and its net income from the first nine months jumped to $1.15/share from 5 cents/share over the same period last year. During the quarter, Chesapeake produced 71 Bcfe of gas and oil compared with only 46.7 Bcfe in the third quarter of 2002 and the 67.3 Bcfe in the second quarter of 2003. Its average daily production rate for the quarter was 772 MMcfe/d, which consisted of 692 MMcf/d of gas and 13,220 b/d of oil and gas liquids.
Houston-based Noble Energy Corp. increased its production 4% in the quarter over a year ago, reporting 90,236 boe/d, compared with 86,807 boe/d in 3Q02. The volumes were up, said Noble, because of start-up production in China and a “substantial” increase in Ecuador, partially offset by lower domestic and North Sea volumes. Domestically, however, Noble’s volumes declined to 59,301 boe/d, compared with 61,073 boe/d a year earlier, mostly because of natural decline rates in the Gulf of Mexico and onshore Gulf Coast region. Noble’s domestic onshore operations were active during the first three quarters of 2003, drilling 50 exploration and development wells with 29 successes. The company plans to drill a total of 85 onshore wells in 2003, of which 49 are scheduled for the Gulf Coast area and 36 are scheduled for the Midcontinent and Rocky Mountain regions.
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