Riding the wave of higher commodity prices, Houston producers Burlington Resources Inc., Apache Corp. and Marathon Oil Corp. all reported jumps in second quarter net income when compared to the same quarter last year.

Burlington reported estimated net income of $278 million for the second quarter of 2003, or $1.38 per diluted share, compared to net income of $170 million or $0.84 per diluted share during the same quarter of 2002.

Burlington’s production during the second quarter of 2003 averaged 2,502 MMcfe/d, which, adjusted for asset sales in 2002, represented growth of 7%. The prior year’s second-quarter production average of 2,646 MMcfe/d included approximately 303 MMcfe/d of volumes from properties subsequently sold during 2002.

“We continued our strong financial and operational performance, while making progress on the major development programs that will drive our production growth in the near future,” said Bobby S. Shackouls, Burlington Resources CEO.

Natural gas production was down, however, averaging 1,879 MMcf/d during 2Q 2003 compared to 1,927 MMcf/d during the prior year’s second quarter.

Burlington said part of the decline was related to its Madden Field’s deeper Madison Formation curtailment late in the quarter as a result of deformations found in several sections of the gas gathering lines. “We have initiated repairs and although it is early in the process, we now expect to ramp up net sales by approximately 80 MMcf/d by year-end,” Shackouls added. “This will restore the deeper Madison production to essentially the same rate we had prior to the shutdown in June.”

Price realizations increased substantially, with natural gas price realizations averaging $4.96/Mcf during the quarter, up from $3.22/Mcf during the prior year’s second quarter.

Looking ahead, Burlington said it expects to achieve volumes of 2,500 MMcfe/d to 2,640 MMcfe/d for full year 2003. For 2004, Burlington said it expects to achieve the higher end of its previously stated goal of averaging long-term annual volume growth in the 3-8% range.

Apache said that record production and higher commodity prices fueled second-quarter earnings of $243 million, or $1.49 per diluted common share, including the impact of a non-cash charge related to foreign currency fluctuations. The company posted net income of $143 million, or 95 cents per share, in the prior-year period. Cash from operations increased to $639 million from $388 million in the prior-year period.

The company realized an average gas price in the United States of $5.19/Mcf during 2Q2003, a sizeable step up from the $3.35/Mcf the company tallied during 2Q2002.

“Record production was just part of the story behind Apache’s second-quarter results,” said G. Steven Farris, president and CEO. “We had significant drilling successes and we have completed $1.5 billion in acquisitions year-to-date, the impact of which will be reflected in future quarters.”

Apache’s gas production averaged 1.25 Bcf/d, up 15% from 1.1 Bcf/d in the prior-year period.

“Apache recorded pretty much in line,” said Irene Haas, an analyst with Sanders Morris Harris. “Burlington’s volumes were a little light this quarter” due in part to the Madden repair. As a result, she noted that the company has moved their 2003 production volume guidance downward.

“So the impact is that this year production will probably be flat versus last year, but by 2004, they should be able to catch up,” she said, adding that it is mainly a timing and logistic issue.

Haas said Burlington has a very “even keel” business strategy. “They tend not to want to spend a lot of money when commodity prices are high. We actually would expect Burlington to generate quite a bit of excess cash flow, which they are returning to shareholders in the form of share buybacks and dividend increases.”

Looking down the road, Haas said she expects gas prices to roughly average $4.75 for the second half of 2003, noting that a winter spike could obviously create a lot of volatility.

Marathon reported second quarter 2003 net income of $248 million, or $0.80 per diluted share, compared to $168 million, or $0.54 per diluted share for the similar quarter a year ago.

Net U.S. gas production fell from 734.3 MMcf/d during 2Q 2002 to 707.4 MMcf/d in the second quarter of 2003. The company added that it realized an average U.S. sales price of $4.14/Mcf during the quarter, compared to $3.35/Mcf realized during the similar period a year ago.

“In early 2002 we outlined our intent to be a major integrated gas player, to strengthen our exploration and production segment and to build on the successful MAP [Marathon Ashland Petroleum LLC] partnership. During the first six months of 2003 we have made great strides on executing these strategies,” said Marathon CEO Clarence P. Cazalot, Jr. “We significantly improved our exploration program, established a new core area, advanced our integrated gas strategy and strengthened MAP’s position. Additionally, we continue to maintain our strategic focus to create superior long-term value growth, while making significant progress on the previously announced asset rationalization program and maintaining financial discipline.”

Marathon’s U.S. upstream income was $237 million in second quarter 2003, compared to $198 million in second quarter 2002. The increase was primarily due to higher natural gas and liquid hydrocarbon prices, partially offset by lower liquid hydrocarbon and natural gas volumes. Derivative losses totaled $21 million in second quarter 2003, compared to gains of $23 million in second quarter 2002.

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