Exploration successes in its deepwater Gulf of Mexico drillingprogram helped to triple reserve replacement to 269% last year forHouston-based Ocean Energy Inc., a positive sign that otherindependents hope to mimic as fourth quarter results are announcedin the next few weeks. Ocean Energy’s over-the-top numbers may notbe matched, but analysts believe independents’ reserve replacementswill be up, averaging around 3%.

Ocean Energy’s success, said CEO James T. Hackett, reflect thecompany’s “enhanced technical expertise, prudent risk managementand strong commitment to financial discipline.” Its finding anddevelopment costs last year were $4.28 boe. Total proved reservesrose 11% to 460 MM boe and proved gas reserves, which make up 52%of total proved reserves, reached 1,431 Bcf. Nearly 62% of Ocean’sreserves are domestic.

Most U.S. independents fourth quarter results still awaitrelease, but early indications are that reserve replacements willbe higher, the result of more exploration and development acrossNorth America in the past 12 months.

Another independent, Denbury Resources Inc., based in Dallas,estimates that its proved reserves were up 45% last year, with 75%of the 2000 year-end proved reserves characterized as proveddeveloped. It had total proved reserves of 87.4 MM boe, with 70.7MM bbl and 100.6 Bcf.

CEO Gareth Roberts said that Denbury’s estimated finding costslast year were about $4.50 boe, “only a modest increase” of 1999’s$3.90 per boe.

“Consistent with our goal of achieving a 50/50 balance of oiland natural gas, we were able to double our proved natural gasreserves during 2000,” Roberts said. “A majority of these naturalgas reserve additions came from our drilling activities atHeidelberg Field in Mississippi, Lirette Field in Louisiana andoffshore.” Roberts said the company expects “much from ourprospects in the coming year.”

Salomon Smith Barney’s Robert Morris and Michael Schmitz, whowrite a weekly exploration and production report, estimate thatvaluations for their coverage group, on average, will be 11.3% for2000. Among those companies they cover, they estimate an 18.9%increase for Vintage Petroleum; 17% for Triton Energy; 16% forForest Oil; 15.2 for HS Resources; 14% for Nuevo Energy; 14% forCross Timbers; 13.8% for Cabot Oil & Gas; 11.2% for AnadarkoPetroleum; 11% for Burlington Resources; 10.9% for BarrettResources; and 10.8% for Apache Corp.

This year, said the analysts, should be even better.

“Overall, we believe that confidence will continue to build withregard to the sustainability of relatively strong natural gasprices.we believe that further gains for many E&P names arestill ahead in 2001,” said the analysts.

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