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Western Gas Resources’ 2Q Production Up; Gas, Prices, Earnings Lower
Natural gas prices just aren’t what they used to be, according to Denver-based Western Gas Resources Inc., which reported net income for the second quarter down, despite a dramatic increase in production.
The company’s net income for the quarter was $13.8 million, or 34 cents per share of common stock, down from the $29.5 million, or 77 cents per share the company posted for the same period in 2001.
The crux of the problem, Western Gas Resources said, was the 32% decrease in average natural gas prices to $3.07/Mcf compared to $4.53/Mcf for the same period in 2001. In addition, average natural gas liquids (NGL) prices decreased 23% to 41 cents per gallon compared to 53 cents per gallon in the same period in 2001.
But it could have been worse. “In the second quarter of 2002, we continued to grow production by 31% from the Powder River coal bed development in the Wyodak and Big George coals,” said Peter Dea, CEO of Western Gas. “The vast majority of our 2002 natural gas sales continue to benefit from equity hedge positions and firm transportation capacity to the Mid-continent. Overall, our operating income in the gathering and processing, exploration and production and marketing businesses is ahead of our projections through the first six months of 2002.”
Western Gas Resources said overall natural gas equity production in the second quarter of 2002 increased 25% compared to the same period in 2001, averaging 121 MMcfe/d. All of the company’s production growth was achieved organically through the drill bit in the Powder River Basin coal bed methane play and the Greater Green River Basin.
Gas sales volumes, including equity gas production, gas produced at the company’s plants and gas purchased from third parties for resale, increased 1% to an average of 1.9 Bcf/d in the second quarter compared to the same period in 2001. However, NGL sales volumes averaged 2.1 million gallons per day for the quarter, representing a decrease of 10% as compared to 2001, which was largely the result of the company’s reduced emphasis on the trading of third-party NGLs.
For the second quarter of 2002, earnings before interest, taxes, depreciation and amortization (EBITDA) was $45.7 million and cash flow from operations was $29.2 million. Revenues fell to $614.9 million from the similar quarter’s level of $887 million last year.
Western Gas Resources’ segments posted the following operating income for the second quarter 2002:
For the first half of the year, net income was $21.8 million, or 52 cents per share, compared to net income of $70 million or $1.85 per share of common stock for the same period in 2001. EBITDA for the first six months of the year was $82.9 million and cash flow from operations was $ 69.9 million. Revenues were $1.2 billion, compared to $2.1 billion for the first six months of 2001.
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