Spurred by — what else — record oil and natural gas prices, North American producers ConocoPhillips, EnCana Corp., Kerr-McGee Corp. and EOG Resources Inc. have millions of reasons to be pleased with 3Q results.

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.

“We had a good quarter,” said Jim Mulva, CEO and newly elected chairman. “Upstream, we ran well, producing 1.48 MMboe/d. Downstream, our refineries ran at 94% of capacity, slightly higher than last quarter. At the same time, we completed significant planned maintenance in our upstream business and elected to accelerate turnarounds at two refineries.”

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.

Conoco ended the quarter with a debt-to-capital ratio of 28% – a statistic considered even more significant since it ended 2003 with a debt-to-capitalization rate of 43%, which was down from a 65% rate in 2000. Conoco is projecting a debt rate in the range of 25%-27% by the end of this year. Conoco’s debt compares with ChevronTexaco Corp., which carries a 5% debt-to-capitalization rate, and ExxonMobil Corp., which has no debt.

EnCana, 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.

“EnCana continues to create exceptional value through investments in our portfolio of low-cost, long-life, North American resource plays,” said Morgan. “These unconventional assets are delivering unconventional production growth,” and this year, 80% of the growth is organic.

Oklahoma City-based Kerr-McGee 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.

CEO Luke Corbett said the company expects to achieve additional production increases in the fourth quarter. He estimated the company’s average daily production will grow 15% next year. “With additional cash from increased volumes, we are continuing to reduce debt, while maintaining active exploratory drilling and capital programs.”

Houston-based EOG 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.

CEO Mark Papa said EOG was “steadily increasing production from the key areas,” and said the company was well positioned to meet its three-year production growth target of 34% through 2006.

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