Forecasting an excellent 2001, Houston-based Ocean Energyoutlined its latest forecast Thursday, and announced it hascompleted the acquisition of Texoil Inc., which is expected togreatly impact 2001 operations.

“We see continued growth in production for 2001 over 2000,” saidWilliam Transier, Ocean Energy executive vice president.. “In fact,we have increased both the quarter and the full year averageproduction by approximately 2,500 boe/d to 147,000 boe/d.” Theexecutive credited the increase primarily to the Texoil deal.

The increase represents an 8% boost in average annual productionfor 2001 over 2000. “I believe that it is safe to say that Oceanwill demonstrate its ability to grow production in a substantialway during 2001 and 2002,” Transier said.

Regarding commodity prices, the company has revised its currentoperating plan to use average commodity prices of $25/boe and$5.50/Mcf of natural gas to reflect the market. “A dollar perbarrel change in the price of oil and a 10 cent per Mcf change inthe price of natural gas is estimated to impact Ocean’s net incomeby $13 million, or seven cents per diluted share, and $8 million,or four cents per share, respectively,” said the executive.”Similarly the effects on cash flow are $21 million and $14 millionrespectively for oil and gas.”

Due in part to higher commodity prices, production taxes arehigher as well., Ocean’s forecast is based on a 20% increaseoverall in drilling cost and a 10% overall increase in servicecost. “We will continue to attempt to offset this increase byaggressively focusing on cost reduction,” said Transier.

In 2001, Ocean said it would participate in the exploration andproduction of 24-30 deepwater wells. “If you put this on acomparative basis, this is more than the top five E&P companiesin our peer group combined,” Transier said.

In announcing its acquisition of Texoil, Ocean said the deal isworth approximately $130 million, including assumed bank debt ofapproximately $15 million, plus certain other liabilities. Thecompany expects the acquisition to be accretive to earnings andcash flow. Texoil’s operations are focused in Texas and Louisiana.

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