One look at Nymex natural gas futures prices will tell yousupply is a little scarcer than consumers probably would like, andfirst quarter financial reports are confirming that production isdown from last year. Producer earnings soared during the firstquarter as a result of higher oil and gas prices, and lowerdomestic gas production should take some of the blame for the bullmarket.

A sampling of 15 major and mid-sized independent producers showslower-48 realized U.S. gas prices rose about 35% on average to$2.39 during the quarter from $1.77/Mcf in 1Q99. Although there wasa mix of production increases and drops, on average the producersreported a 3% decrease in gas production volumes for the quartercompared to the same quarter last year.

The drop is larger if mergers and acquisitions are taken intoaccount. Santa Fe, for example, merged with Snyder Oil last summerand the new company reported first quarter domestic gas productionrose an astonishing 132% to 360 MMcf/d. Mainly because of itsacquisition of Statoil’s E&P arm, Equitable’s production jumped38% to 244 MMcf/d. HS Resources, however, showed gas productiongrowth as a result of drilling success in the DJ Basin and the GulfCoast region where six out of seven new wells were commerciallysuccessful.

ExxonMobil, Burlington, Ocean and Basin showed single digitgrowth, while Chevron, Union Pacific, Conoco, Kerr McGee, AmeradaHess and Pioneer showed double digit declines.

Although it will be several weeks before the full story isknown, the Energy Information Administration still is expectingdomestic dry gas production to increase during the first quarter1.3%.

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