Houston-based independent Pogo Producing Co. on Tuesday reported the strongest earnings in its history, with 4Q2005 profits nearly tripled to $114.5 million ($1.98/share), compared with $38.3 million (60 cents) in 4Q2004. For full-year 2005, Pogo’s net income was $750.7 million ($12.43/share), compared with $261.75 million ($4.10) in 2004. Pogo, which has been on the short list of possible acquisition targets, also reported year-end reserves grew by 15%, its fourteenth consecutive year of growth.

“We hit the ground running,” CEO Paul G. Van Wagenen said of 2005. Speaking to analysts during a short conference call, the CEO/chairman said last year’s key acquisitions and asset sales set the stage for “achieving even more growth in 2006 and beyond.” This year also is expected to be a strong one for drilling across North America.

“Pogo is becoming a new, and stronger, company,” said Van Wagenen. “Paramount among our successes is the significant upgrading of Pogo’s future exploration prospectively resulting from the Aug. 17, 2005 closing of the sale of our Gulf of Thailand license interests, plus the Sept. 27, 2005 closing of the purchase of Northrock Resources.” Canadian-based Northrock, which Pogo purchased from Unocal Corp. last year, boosted its proven reserves 45% (see Daily GPI, July 12, 2005).

With its strong earnings on the books, Pogo has set a capital budget for 2006 of $725 million, which includes the costs of drilling 451 gross wells. Last year, Pogo spent about $2.239 billion for exploration and acquisition spending, but net of acquisition expenses, the producer spent about $410 million. Pogo explores mostly in North America; it also has assets in New Zealand.

In 2005, Pogo added proven equivalent oil and natural gas reserves of 761.6 Bcfe. Net of the Thailand-based asset sale (340.8 Bcfe of proven reserves), Pogo replaced an estimated 268% of its 2005 production of 156.8 Bcfe, which included Northrock’s estimated 604.1 Bcfe of reserves in Canada. Pogo’s year-end 2005 estimated equivalent proven oil and natural gas reserves, as calculated by its independent engineering consultants, rose to a record 2.042 Tcfe, with 657.2 Bcfe in Canada.

Averaged across the full year, Pogo’s 2005 production was negatively impacted by Hurricanes Katrina and Rita by 40 MMcf/d and 10,000 bbl/d of oil. As 2006 begins, only 4,000 net bbl/d and 20 MMcf/d remain shut in as a lingering result of the 2005 hurricanes. “It is estimated that repair work taking several more months will be required in order to fully restore Pogo’s offshore production,” the company said in a statement.

Pogo and its joint venture partners drilled 210 gross wells in the western United States in 2005, 196 of which were successfully completed as producers, a success rate of more than 93%. Moreover, 23 additional Permian Basin wells were in various stages of being drilled, completed or tested as the year came to an end.

Its 50%-owned New Albany Shale play in southwestern Indiana is now producing from the first four of seven wells drilled to date, at a gross rate of about 1.5 MMcf/d. The first of about 20 New Albany Shale exploration and development wells budgeted for 2006 will soon spud, Pogo said.

Northrock drilled 43 gross wells in 4Q, with 39 producers. Pogo is initially budgeting for 184 gross wells to be drilled in Canada in 2006, including 33 exploration wells, “setting the stage for possibly significant reserves and production growth in this important region.”

Pogo also announced that the stock repurchase program begun in January 2005 has reached a total of 7.3 million shares at a total cost of $360 million, an average price of just over $49/share. More stock repurchases are anticipated.

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