Special charges related to discontinuing exploration in Pakistan and on Block 19 offshore Angola ($76 million), along with the cost of repurchasing higher-cost debt ($7.6 million) resulted in a third quarter net loss of $0.9 million or $0.01/share for Ocean Energy compared to net income of $48 million or $0.27/share in 3Q2001. Without the impact of special items, the company reported net income of $56 million or $0.31/share.

Tropical Storm Isidore and Hurricane Lili also negatively impacted exploration and production drilling during the quarter but not enough to show a net decrease compared to 3Q2001. In addition, commodity prices were higher compared to last year. Discretionary cash flow (income from continuing operations before DD&A, impairment, deferred taxes and other non-cash operating activities) for the third quarter was $196 million or $1.09 per fully diluted share, compared to $165 million or $0.92 per fully diluted share for the same period in 2001.

“Absent special items, Ocean’s earnings were strong and production continued to grow as part of a projected multi-year growth profile for our investors,” said CEO James T. Hackett.

Average daily production for the quarter was 160,000 boe/d, up from 152,000 boe/d in the previous quarter. The higher volumes were primarily attributable to new deepwater production from the Nansen and Boomvang projects in the Gulf of Mexico and continued success of Zafiro field exploitation initiatives in Equatorial Guinea.

Domestic natural gas production fell slightly to 430 MMcf/d from 435 MMcf/d. The company said despite the setbacks associated with the hurricane, which delayed drilling by 20-30 days on many projects (5,000 b/d remains shut in), it expects production to rise 3-4% this year compared to last. However, the hurricane activity caused a shake up in the timing of certain projects and may cause Ocean to miss certain production targets going forward, company officials indicated. Well completions suffered during the latter part of the third quarter because of the hurricane and the company’s deepwater drilling program has been pushed back slightly. Ocean now is forecasting it will end the year with 154,000 boe/d of production, which is down from prior guidance of 162,000 boe/d.

However, company officials said they expect continued production growth from the Nansen/Boomvang complex despite the delays associated with the hurricane. The two Gulf of Mexico facilities are currently producing 33,000 boe/d. Seven of nine subsea wells and four of 15 dry tree wells are producing. At least three new wells are scheduled for completion by year end. Four other deepwater prospects are underway, and up to four additional deepwater wells are scheduled to commence drilling during the fourth quarter.

Ocean expects to sell another $15 million in oil and gas assets before the end of the year after selling $61 million in assets during the third quarter. The production impact in the fourth quarter from the divestitures is expected to be 2,300 boe/d.

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