More efficient development plans, speedier drilling completions and falling service costs helped some key North American independents build their natural gas reserves in 2Q2007 including EnCana Corp., XTO Energy Corp., Range Resources and Newfield Exploration Co., which all delivered impressive gas volume results last week.

Calgary-based EnCana‘s quarterly gas production in six of its nine North American gas resource plays grew in double-digits. Total gas output rose 4% to 3.51 Bcf/d in the quarter. Oil and gas production from continuing operations totaled 4.306 Bcfe/d, compared with 4.154 Bcfe/d in 2Q2006.

Along with its Deep Bossier production success in East Texas, where gas volumes grew 49%, EnCana also scored with rising coalbed methane growth in central and southern Alberta, and gains in the Cutbank Ridge play in northeast British Columbia, the Bighorn field in west-central Alberta, the Jonah Field in the Piceance Basin of Wyoming and the Barnett Shale Basin near Fort Worth, TX.

Declining gas prices last year prompted EnCana and several other gas producers to scale back and to shut in some wells in the Rocky Mountains and in Canada. CEO Randy Eresman said that decision led management this year to reduce EnCana’s full-year production growth target, but he upped it last week.

“Our overall portfolio could grow at the higher rate [of 8-10%], but to achieve the higher rate of growth, we would have to go through our inventory at a higher rate,” Eresman explained. “We sort of assessed the situation and started detailing cost implications, and we realized that if we moved at a higher rate, we tended to bring in less efficient equipment at a higher cost. It had a very major impact on the returns we were able to get. With a lower growth profile, we are able to achieve close to our higher growth strategy, but we have extra money as well…We have come to the conclusion that having a portfolio with choices is better than the benefit of a higher growth rate.”

EnCana’s quarterly net income dropped by nearly a third following a US$1.3 billion nonoperating gain in 2Q2006. Net income fell to $1.45 billion ($1.89/share) from $2.16 billion ($2.55) in 2Q2006. However, operating profits climbed 67% to $1.38 billion ($1.80/share) from $824 million (98 cents), and cash flow rose to $2.55 billion ($3.33).

Fort Worth’s XTO raised its production growth forecast for the rest of 2007 by 2% to 17% after reporting record gas output in the quarter. Gas production rose a solid 12% from a year ago to reach 1.698 Bcf/d. XTO now expects to produce between 1.49 Bcf/d and 1.5 Bcf/d in 3Q2007; in the final quarter, output is expected to rise to around 1.6 Bcf/d. Average realized gas prices in 2Q2007 were up 14% from the same period a year ago to $7.94/Mcf from $6.99/Mcf.

XTO’s net earnings were in line with Wall Street expectations, increasing to $432 million ($1.14/share) from an adjusted $319 million (86 cents) in 2Q2006. Including a one-time after-tax gain of $292 million on the sale of Hugoton Royalty Trust units and a $26 million income tax expense, XTO’s profit dropped 28% in 2Q2007. However, revenue jumped 28% to $1.33 billion.

Fort Worth-based Range Resources Corp. saw its net income surge 31% to $65.19 million. Gas production, which comprises 76% of output, jumped 30% from a year earlier to 236 MMcf/d on the back of its core output in the Barnett, Nora and Devonian shale prospects. Total production was 313 million boe/d. Average U.S. gas prices were up 17% to $7.32/Mcf, and adjusting for hedging, average prices reached $7.75/Mcfe, which was 18% higher than in 2Q2006.

Range CEO John Pinkerton told energy analysts last week that the company’s quarterly results “reflect the best operational performance in our company’s history.” Range managed to overcome 14 MMcf/d of production losses when it sold its Gulf of Mexico assets in April, and it posted its 18th consecutive quarter of production gains. Pinkerton said Range’s onshore gas output more than made up for the offshore losses.

Houston-based Newfield Exploration Co. impressed analysts with a 60% increase in income and a 17% jump in its U.S. gas volumes. Net profit reached $150 million in 2Q2007, compared with and U.S. gas production volumes were up 17% to about 617.6 MMcf/d. New field reported record production at its Woodford Shale, Texas Wash, Val Verde and South Texas assets during the period, and it brought on new production at the Wrigly, Grove and Abu developments. Average U.S. gas prices rose 7% from a year earlier to $7.46/Mcf.

Friedman, Billings, Ramsey & Co Inc. analysts noted that Newfield hit its production guidance “for the first time in a while,” and “is beginning to climb out of the penalty box the market put it in after the 1Q2007 earnings release.” With its Gulf of Mexico assets now sold and new Rocky Mountain properties in its portfolio, “the company becomes increasingly onshore resource play-focused and progresses up the learning curve in the Woodford Shale; we believe the company is beginning to fire on all cylinders.”

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