First quarter earnings for North American energy companies are sounding a varied tempo in the cacophony of record profits and natural gas production. Texaco Inc., Apache Corp. and Anadarko Petroleum Corp. jazzed up their bottom line with producing acquisitions. Mitchell Energy & Development Corp., however, relied on an old Texas saying to “dance with the one who brung ya.” Both ways, it appears, are playing equally well.

The Woodlands, TX-based Mitchell recorded its fifth consecutive quarter of record earnings, reporting first quarter earnings of $2.41 per share, or $122.9 million. The report is a 177% increase over the first quarter of 2000, which brought the company 87 cents per share, or $43.3 million.

While natural gas revenues played a major part in tripling the earnings — an increase of $156 million — 80% of the increase in gas volumes came from its Barnett shale in North Texas, where 150 wells have been drilled over the past 12 months and 276 wells are planned through this year.

Mitchell also got a boost from exploratory success and follow-up drilling along the Texas Gulf Coast, which added 23 MMcf/d. Total company gas production is on a pace to meet or exceed Mitchell’s estimate of 25% annual growth in 2001.

“Our last two scheduled Barnett rigs didn’t start drilling until late March, due to contractor delays,” said CEO George P. Mitchell. “So, we have picked up two more rigs in April and plan to have 15 rigs drilling the Barnett by the third quarter. This will ensure that we complete the 276 wells scheduled this year and achieve our growth rates.”

Speaking during a conference call with investors, company officials said they were always considering acquisitions, and also did not rule out that they could be a target for a merger in the future. Earlier this month, CEO Mitchell, 82, put 4.5 million of his company shares on the block to improve the company’s liquidity and reduce his ownership to under 50% (see Daily GPI, April 5). The secondary offering would leave him with about 22.9 million shares, or 45.5% of the company that he founded.

Meanwhile, a couple of other Texas-based independents didn’t fare too badly in the first quarter reports either. Houston-based Apache Corp. saw its earnings more than double in the first quarter, mostly because of higher commodity prices and higher oil and gas production volumes resulting from acquisitions.

Apache’s net income rose to $277.3 million, or $2.15 per diluted share, up from $104.2 million or 90 cents per diluted share in 2000. Thomson Financial/First Call had predicted earnings of $2.13 per share. Its revenues were up to $795 million from $448 million, and its basic earnings per share were up to $2.235 from 92 cents a year earlier.

Natural gas production for Apache jumped 33% to 988 MMcf/d, reflecting contributions in part from global acquisitions in Egypt, Argentina and Canada that closed in the first quarter.

“Factoring in the two acquisitions closed at the end of the quarter and added production from our successful first quarter drilling program, Apache expects a sizable production increase in the second quarter,” said CEO Raymond Plank. “Apache’s fast start to the year, rising production and favorable price signals point to another rewarding year for our shareholders.”

The largest U.S. independent, Houston-based Anadarko, didn’t report Canadian natural gas volumes in the first quarter of 2000, but more than made up for it in 2001. For the first three months of the year, Anadarko’s Canadian operations produced 24 Bcf, with an average of 269 MMcf/d at a price of $6.50/Mcf.

Anadarko’s first quarter earnings, meanwhile, soared on high commodity prices, with net income standing at $656 million or $2.50 a share, up from $31 million or 24 cents a share a year earlier. First Call had estimated earnings would be $2.03 per share. Revenue jumped to $3.05 billion, up from $661 million in the first quarter of 2000.

“Our first quarter shows great growth, and we intend to continue growing with the drill bit,” said CEO Robert J. Allison Jr. “We’ve set some very ambitious targets for the full year 2001, and we’re well on our way to achieving those goals.” He said the earnings came within “striking distance” of earning “almost as much as we did for all of 2000,” which was $796 million.

Anadarko’s production of natural gas, crude oil and natural gas liquids saw a 236% increase, which it attributed mostly to last year’s acquisition of UPR and increased production from operations in Texas, the Gulf of Mexico and Alaska.

“Anadarko was the most active driller in North America last year and this past quarter, and we achieved significant production growth because we had the people and the prospects to take advantage of the thriving natural gas market when the time came,” Allison said. “Because we didn’t lay off people over the lean years and concentrated on technology, we have a big inventory of prospects to drill.”

Texaco, the No. 3 U.S. energy company, saw its first quarter earnings climb as well. The White Plains, NY-based company, now being acquired by Chevron, said income before special items stood at $836 million, or $1.54 per share. First quarter 2000 earnings were $602 million, or $1.10 a share. First Call had estimated earnings would be $1.49 per share.

CEO Glenn Tilton, who took over the company a few months ago, said that earnings were “propelled by strong worldwide crude oil and U.S. natural gas prices…our upstream results were their highest ever.” The merger of Texaco and Chevron, which would create the world’s fifth largest energy company, is still awaiting approval from U.S. antitrust regulators (see Daily GPI, Oct. 17, 2000).

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