Western Gas Resources, which is focused on production, gathering and processing in the northern Rockies and most significantly in the Powder River Basin of Wyoming, reported a sharp 51% increase in quarterly net income to $20.9 million, or 56 cents/share, and a 24% increase in gas production to 149 MMcf/d. Net income for the first six months of the year rose more than 100% to $44.3 million, or $1.19/share.

“We benefited from strong prices, volume growth in our production and midstream businesses and our firm transportation positions to Midcontinent markets,” said CEO Peter Dea. “The Powder River [coalbed methane (CBM)] and the Pinedale Anticline developments both experienced significant volume growth from year-ago periods.

“We are particularly encouraged by stellar results from the Big George coal [in the Powder River Basin] as it nears 100 MMcf/d of total industry production. We feel confident that the recent release of permits from the [Bureau of Land Management (BLM)] is an indication of a steady stream of permits to follow in the coming months. This will allow us to develop our dominant position in this emerging, prolific fairway and will drive future growth beginning in the second half of 2004.”

All of the company’s gas production growth was in the Powder River Basin CBM play and the Greater Green River Basin in Wyoming. Western’s total gas sales volumes fell to 1.2 Bcf/d in the second quarter compared to 1.9 Bcf/d for the same period in 2002 because of reduced sales for third parties. Average gas prices, however, increased 61% to $4.86/Mcf.

Western said its total gas liquids sales volumes fell 24% to 1.6 million gallons per day because of the sale of its Toca facility in Louisiana in September 2002. Average NGL prices increased 32% to $0.54 per gallon.

Exploration and production’s realized operating profit of $29.4 million, which was up from $15.9 million for the same period in 2002. The increase was primarily due to substantially higher gas prices and significant production growth in the Powder River Basin and Pinedale Anticline.

Gathering and processing’s realized operating profit rose slightly to $27.9 million compared to $25.4 million a year earlier. The company remains the largest gatherer and transporter of coalbed methane in the Powder River Basin. Gathering volumes were up 15% in the second quarter.

Gas transportation operating profit fell to $2.9 million from $3.2 million in 2Q 2002. And marketing operating profit fell to $9.2 million compared to $13.4 million for the same period in 2002.

Western said results from its marketing business have benefited significantly from transactions utilizing the company’s firm transportation capacity and storage positions. Its transportation allows it to purchase gas in the Rocky Mountain region for resale in the Midcontinent markets. However, operating profit decreased as the price difference between the two regions narrowed as additional transportation capacity out of the Rocky Mountain region became operational in the second quarter of 2003.

Its Powder River CBM production increased 9% to 11.1 Bcf. It has participated in 273 CBM wells this year through July and plans to participate in a total of 600 to 650 CBM wells in 2003.

Gross CBM production from the Big George coal in the Powder River Basin was 32 MMcf/d. Overall, total industry production from the Big George has increased 175% in the last 12 months to 99 MMcf/d in May 2003. Western expects to participate in 255 Big George wells in 2003 as part of its overall drilling program.

The BLM issued a final Record of Decision for the Powder River Basin Oil and Gas Environmental Impact Statement on April 30 and began accepting new applications to drill CBM wells on federal acreage. To date, 46 of the 86 permits approved since the decision will benefit Western Gas.

Western said production sold from the Pinedale Anticline, Jonah Field and Sand Wash Basin development areas in southwestern Wyoming and northwestern Colorado increased 206% in the second quarter to 2.5 Bcfe and averaged 27 MMcfe/d.

A third and fourth phase expansion of the company’s 50%-owned Rendezvous gathering system into the Pinedale Anticline is under construction. The two phases will increase gathering capacity to 350 MMcf/d and are expected to be completed by December 2003 at a net cost of $17.7 million to Western. Volumes on the operational portion of the Rendezvous system averaged 216 MMcf/d in June 2003. As part of the expansion process Western is implementing a 100 MMcf/d processing capacity upgrade at its Granger plant.

Western said it expects production volumes this year to average 145 MMcf/d, up 8% from last year. Total gas sales volumes marketed are expected to range from 1.7 to 1.8 Bcf/d for the last six months of 2003.

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