As exploration and production companies unveil their earnings for the third quarter, one thing is clear: high oil and natural gas prices have fueled record earnings once again. However, oil and gas output numbers are mixed, with Burlington Resources Inc., XTO Energy Inc. and Shell Canada Ltd. reporting higher overall production, while Occidental Petroleum Corp. was slightly down.

Houston-based Burlington Resources Inc. set a new quarterly record for earnings income, reporting $389 million (98 cents/share), which is a 46% increase over the $267 million (67 cents) on a post-stock-split basis earned in 3Q2003. Total production grew to 2,815 MMcfe/d from 2,551 MMcfe/d a year ago.

“Burlington continues to perform very well, both operationally and financially,” said CEO Bobby Shackouls. He said “regardless of commodity price cycles,” the company was committed to “achieving both top-line growth and sector-leading returns.”

Natural gas production grew 1% in the quarter to 1,906 MMcf/d, from 1,889 MMcf/d a year ago. Natural gas liquids (NGLs) production increased 6% to 66,500 bbl/d from 63,000 bbl/d, and crude oil production increased 80% to 85,100 bbl/d from 47,300 bbl/d in 3Q2003.

“As expected, natural gas production declined in Canada when compared to the prior year’s third quarter, due to last winter’s short drilling season, wet summer weather that hampered field operations, and a measured approach to capital investments in response to rising service costs and the strengthening Canadian dollar. However, Canadian natural gas production has flattened in recent months, and Burlington plans to accelerate development activity there during the balance of 2004 and 2005.”

For the full year, Burlington estimates U.S. gas production will be in a range of 905-920 MMcf/d, and in Canada, a range of 810-825 MMcf/d. Total gas production, including international numbers, will range between 1,890-1,955 MMcf/d, according to Burlington.

“Burlington once again reported very strong quarterly results, and we expect the stock to react positively to the earnings release,” said Lehman Brothers analysts. The earnings per share of 98 cents, “exceeded our 90 cent estimate as well as the consensus view of 93 cents. Higher than expected production and product prices led to the positive earnings surprise.”

The analysts said, “We believe that Burlington is one of the few large cap exploration and production companies that offer an attractive and visible production growth profile while generating significant cash flow and continue to recommend it as one of our favorites in the large cap space.”

Los Angeles-based Occidental Petroleum Corp. announced record net income of $758 million ($1.91/share), compared with $446 million ($1.16) a year ago. Oil and gas segment earnings were $1.0 billion, compared with $660 million in 3Q2003, an increase of 52%.

CEO Ray R. Irani credited high oil prices and “robust gas prices,” plus improved chemical margins for the record results.

Net natural gas production in the quarter was 488 MMcf/d, down from 534 MMcf/d posted a year ago. For the first nine months, gas production was 509 MMcf/d, down from 535 MMcf/d in 2003. Crude oil and liquids production in the third quarter was 251,000 bbl/d, down from 259,000 bbl/d.

Lehman Brothers analysts said the initial reaction to Occidental’s strong earnings may be positive, but “concerns related to the lighter than expected oil and gas production may mute the initial enthusiasm over the course of the day.” Production was about 2% lower sequentially from the second quarter, and U.S. gas production in the third quarter was also “somewhat lower than estimated.”

Fourth quarter completion of a new pipeline and three processing plants should expand production capacity in XTO Energy Inc.’s Freestone Trend by more than 60% to 730 MMcf/d, but the Fort Worth-based independent said estimated volumes will be lower than previous forecasts to reflect “ongoing curtailments imposed by third-party pipeline purchases.”

Fourth quarter estimates also were adjusted to reflect preferential purchase right elections, property trades and sales associated with properties acquired this year from ChevronTexaco. In August, XTO completed the largest acquisition in its history with the purchase of 150 onshore producing assets for $1.1 billion from ChevronTexaco. The purchase added 88 MMcf/d of gas and 14,000 bbl/d of oil from properties in seven states.

Under its revised estimates, XTO now expects fourth quarter gas production to be in the range of 910-920 MMcf/d, down from a previous estimate of 925-930 MMcf/d. Oil production was revised to a range of 31,500-32,000 bbl/d, down from 33,000-33,500 bbl/d. Natural gas liquids (NGLs), however, were revised upward to a range of 7,000-7,500 bbl/d from 6,500-7,000 bbl/d.

For the third quarter, XTO posted strong profit, which was fueled by higher production and higher prices. Quarterly earnings reached $140.8 million (54 cents/share), up from $102.8 million (45 cents) in 3Q2003. Excluding expenses for stock-based compensation, XTO earned $151 million (58 cents), which beat Thomson First Call estimates of 55 cents/share.

Total revenue was up 58% to $507.4 million from $322.1 million a year ago, with oil production doubling to 25,984 bbl/d. Average prices were also up 35% to $38.58/bbl. Gas production also increased 19% in the quarter, to 874 MMcf/d, with average prices up 20% to $5.02/Mcf. NGL production was down 9% to 7,070 bbl/d.

Canada’s fourth-largest energy company, Shell Canada Ltd., posted a 94% increase in profit in the third quarter with the help of higher commodity prices and stronger production numbers. Net income was C$451 million (US$362.8 million), or C$1.63/share, compared with C$232 million (84 cents) in 3Q2003. Sales were up 34% to stand at C$3.06 billion.

Natural gas sales fell slightly in the quarter to 536 MMcf/d from 537 MMcf/d in 3Q2003. Gas sold for C$6.24/Mcf, a gain of 4% from a year ago. Production of bitumen, an extra-heavy crude oil, at the Athabasca Oil Sands Project rose 33% from a year earlier to 154,200 bbl/d. The company is focused on Alberta’s tar sands as conventional North American reserves decline and demand rises.

Shell Canada, which owns 60% of Athabasca, and its partners plan to spend at least C$4 billion to expand tar sands output to 270,000-290,000 bbl/d by 2010. ChevronTexaco Corp. and Calgary-based Western Oil Sands Inc. each own 20% of the venture.

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