Higher oil and gas prices are fueling improved quarterly earnings reports, with several of the top North American producers reporting major gains on Wednesday. ConocoPhillips beat Wall Street’s earnings estimates by 14 cents/share, and two other large U.S.-based independents, Pioneer Natural Resources Co. and Kerr-McGee Corp., also posted gains. Meanwhile, Calgary-based Talisman Energy Inc.’s record earnings are expected to help grow its gas-heavy production 10% this year.

ConocoPhillips, based in Houston, reported second quarter net income of $1.14 billion ($1.66 per share), compared with $351 million (91 cents) for the same period last year, which was prior to the merger of Conoco Inc. with Phillips Petroleum Co. Operationally, upstream production was 1.64 MMboe/d during the quarter, up slightly from the first quarter, including Canadian syncrude. Increased production in Venezuela was partially offset by seasonal declines in Alaska and the North Sea. U.S. Lower 48 gas prices averaged $5.10/Mcf in the second quarter, compared with $2.26 in 2Q02.

“We continue to strengthen our upstream portfolio through legacy project advancement and planned asset dispositions, as well as through efforts aimed at growing our worldwide natural gas business,” said CEO Jim Mulva. “For example, we announced a major integrated liquefied natural gas project in Qatar, and the Mackenzie Delta participants submitted a Preliminary Information Package, in connection with a pipeline, required for the ultimate development of this area.”

Dallas-based Pioneer Natural Resources Co. reported net income of $77.2 million (65 cents per share), compared with $11.1 million (10 cents) in 2Q02. Quarterly oil and gas sales increased 45% from a year ago, averaging 159,092 boe/d. Gas sales averaged 626 MMcf/d. The realized price for gas was $4.08/Mcf, with North American gas prices averaging $4.77/Mcf. For the same quarter last year, Pioneer reported gas sales of 342 MMcf/d.

So far this year, Pioneer has successfully drilled 155 wells in the United States, 23 wells in Canada and 35 wells in Argentina. Onshore in the United States, the company is running 13 rigs, including five in the West Panhandle gas field and six in the Permian Basin. Pioneer also is evaluating the commercial potential of its Jurassic discovery in the Northwest Kuparuk River area of Alaska. The evaluation effort is multifaceted, but Pioneer said it was encouraged with the early results of the work in progress. Pioneer expects third quarter production to average 150,000 to 165,000 boe/d.

“In addition to the strong growth profile we have established from the projects currently under development, we have many projects in earlier phases that offer upside impact in 2004 and beyond,” said Pioneer CEO Scott D. Sheffield. “Wells drilling on the Gulf of Mexico shelf, in the Falcon Corridor and in Tunisia, if successful, could further increase production beginning in 2004.”

Kerr-McGee Corp., based in Oklahoma City, swung to a profit in the quarter following last year’s net loss on charges. Second quarter income was $69.6 million (68 cents a share), compared to a net loss of $58 million (minus 58 cents) in 2Q02. Included in this quarter’s results were $24.6 million in charges for chemical plant shutdowns and other smaller items, but the company also warned that additional charges of $27 million could be incurred for exploration expenses in the quarter if some of its current drilling ventures prove unsuccessful.

Daily oil production averaged 154,800 b/d, down from 189,300 b/d a year earlier, mostly because of the sales of almost $1 billion of noncore producing properties. Natural gas sales also were lower because of asset sales, averaging 697 MMcf/d in the quarter, compared with 731 MMcf/d in 2Q02. The average gas sales price for the quarter, which included hedging, was $4.29/Mcf, 45% higher than a year ago.

“Our Gunnison, Red Hawk and Bohai Bay developments are moving forward within budget and on schedule,” said CEO Luke R. Corbett. He said that in June, the company expanded its global deepwater portfolio with the addition of 6.5 million acres offshore Bahamas. “We now hold interests in more than 70 million undeveloped acres worldwide, with 85% in deep waters, where we have the expertise and technology to explore for and develop new oil and gas resources efficiently and cost-effectively.”

Canada’s Talisman reported record high cash flow and earnings for the first six months of the year, and while cash flow was down for the quarter, the company’s earnings were well above the numbers from last year. Cash flow during the second quarter was C$600 million (C$4.65 per share), compared with C$652 million (C$4.84) a year earlier. Quarterly earnings were C$201 million (C$1.52) versus C$90 million (C62 cents) in 2Q02.

In line with its guidance, production averaged 365,000 boe/d during the quarter. Unit operating costs averaged C$6.98/boe, down 3% from the first quarter. Capital spending was C$503 million during the quarter and Talisman’s net debt at the end of June was C$1.8 billion. On a net basis, debt to debt-plus-equity was 27%, down from 40% at year end.

“This quarter was operationally on plan, helped by strong commodity prices and I am looking forward to an exciting second half,” said CEO Jim Buckee. “We expect greater than 10% production growth by year end; we have a number of high impact exploration wells drilling, or about to drill; and Talisman has one of the strongest balance sheets in the sector.” He said natural gas will continue to be Talisman’s focus, supplemented by low risk oil projects.

Talisman’s North American gas production is up 5% from a year earlier, averaging 865 MMcf/d. The increase has come from the addition of U.S. gas properties acquired late last year, which alone contributed 67 MMcf/d in the second quarter. The company also has completed several small acquisitions to date, which are expected to boost production in 2004, Buckee said. Total exploration and development spending for this year is expected to be about C$2.25 billion. In North America, Talisman participated in 108 wells (gross) in the quarter. A total of 43 gas and 56 oil wells were drilled, resulting in an average success rate of 92%.

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