The burden of increasing North American natural gas production may rest on the shoulders of the independents, according to first quarter earnings reports now beginning to be tallied. Although earnings were sky high, none of the leading oil and gas majors increased North American gas production in the first quarter of this year, and so far, only a handful of the larger independents eked out gas increases.

According to quarterly reports, North American gas production fell 15% at ExxonMobil, 14% at Royal Dutch/Shell Group, 13% at ChevronTexaco, about 9% at ConocoPhillips and Marathon Oil Co. and 7% at Unocal Corp.

Meanwhile, a few independents are in their groove in finding new gas, onshore and offshore in North America. Calgary-based EnCana Corp. led the pack with a 10% increase in 1Q gas production, followed by Newfield Exploration, with a 9% gain. Also showing positive numbers were Anadarko Petroleum Corp. and Murphy Oil, both up about 1%. Kerr-McGee showed gains worldwide, but its North American output was down 10%.

EnCana

“Our first quarter 2004 operational performance is firmly on plan and our financial results remain solid,” said CEO Gwyn Morgan. “Continued strong gas production growth from resource plays in Western Canada and the U.S. Rockies, plus strong oil production increases from Ecuador and our steam-assisted gravity drainage projects in northeast Alberta, is anchoring our sustained growth and value creation.”

Production-wise, EnCana’s gas output was up 10% over a year ago, and oil and NGL sales were up 34% to stand at 265,000 boe/d. First quarter gas sales were 2.7 Bcf/d, up 5% over last year, when it sold 120 MMcf/d. Operating costs were $3.53/boe, slightly higher than forecast because of weather and a weak U.S. dollar, the company said. For the full year, the company expects operating costs to be in its forecast range of between $3.30-$3.50/boe. The first quarter capital program was $1.5 billion. Net divestitures of about $300 million reduced investment to $1.2 billion of net capital.

Anadarko

Houston-based Anadarko Petroleum Corp. reported a 5.6% increase in net income from a year earlier, boosted by strong production volumes and prices. The company handily beat Wall Street expectations, reporting net income was $393 million ($1.55/share), compared with $371 million ($1.45). Wall Street pegged earnings of $1.42/share.

Excluding charges, Anadarko earned $1.70/share. Revenue rose to $1.46 billion from $1.26 billion a year ago. Cash flow from operating activities totaled $885 million, compared with $705 million in 1Q2003. Before special items, cash flow in the first quarter was $944 million, compared with $794 million in 1Q2003.

“Strong volumes and favorable variances on expenses compared to our guidance, in addition to robust commodity prices, have us on track to deliver on the performance metrics we’ve laid out for shareholders this year,” said CEO Jim Hackett. Hackett, a former Devon Energy Corp. COO, became president and CEO last December, and took over the chairman’s role from Robert Allison on Jan. 1 (see NGI, Dec. 8, 2003).

During the first quarter North American natural gas sales volumes were up 1% to 1.723 Bcf/d from 1.705 Bcf/d in 1Q2003. Domestic average realized gas prices climbed to $4.92/Mcf, up from $4.60 a year ago. Oil sales were up 17% worldwide to 202,000 bbl/d, compared with 173,000 bbl/d, which Anadarko attributed to Algerian operations. Average prices were $29.94/bbl, compared with last year’s $28.64. Anadarko still anticipates 2004 output worldwide to reach 193-199 MMboe, up from 192 MMboe in 2003.

Kerr-McGee

“We continue to consistently meet or exceed our guidance in all aspects of our operations,” said CEO Luke R. Corbett. “The ongoing efficient execution of our development and exploitation program, including the early start-up of Gunnison, enabled us to achieve total volumes near the upper end of our guidance.” Other major development projects also are going well, he said, adding that the merger with Westport Resources Corp., announced in early April, “will add depth, breadth and balance to our oil and gas operations.”

Operating profit in the quarter was $330.3 million, compared with $269.6 million in 1Q2003. E&P income was $329.9 million, compared with $272.2 million for the prior-year quarter. The increase came on higher oil and gas sales prices, slightly higher natural gas sales volumes and lower exploration costs, which were partially offset by lower crude oil sales volumes and higher other operating costs.

Kerr-McGee’s gas sales averaged 763 MMcf/d in the first quarter, slightly higher than the 761 MMcf/d reported in 1Q2003. The average gas sales price, including the effects of the company’s hedging program, was $5.35/Mcf, a 14% increase from the 2003 first quarter. Kerr-McGee’s daily oil production from continuing operations averaged 143,200 bbl in the quarter, down 13% from 165,400 bbl/d a year ago. The decrease followed the sale of some of its non-core, high-cost properties, as well as lower production in North Sea operations.

Murphy Oil Corp.

Murphy Oil reported a 13% increase in quarterly profit on higher prices and increase oil and gas volumes. The El Dorado, AK-based independent reported first quarter net income of $98.2 million ($1.05/share), compared with $87.1 million (94 cents) in 1Q2003.

Murphy’s North American gas sales prices averaged $5.88/Mcf, down from $5.95 a year ago. Gas sales volumes, however, increased to 124 MMcf/d from 116 MMcf/d in 1Q2003, which Murphy attributed to production from the Gulf of Mexico Medusa and Habanero fields.

Newfield Exploration

Houston-based Newfield beat analysts’ expectations by a nickel, with quarterly net income of $77.9 million ($1.38/share), compared with $64.1 million ($1.18) for the same period of 2003. Revenues were $305.4 million, up from last year’s $267.9 million.

Production-wise, the independent reported natural gas output was 48.1 Bcf, up 9% from 44 Bcf reported in 1Q2003. Oil and liquids were flat at 1.5 million bbl. Average realized gas prices for the quarter were $5.30/Mcf, up 5% from last year’s $5.05.

Capital expenditures in the first quarter were $152.3 million.

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