Fort Worth-based XTO Corp., one of the few U.S. producers expected to post natural gas production gains in the third quarter, has increased its price hedges for gas production through 2004. The company already had hedged about 90% of its 2002 production through the rest of this year.

XTO raised its 2003 hedges to 70% of its expected production at an average Nymex price of $3.93/Mcf. In June, the company announced that it had restructured its hedges for 2003 and planned to concentrate them in the first quarter of next year. XTO now has 510 MMcf/d hedged for the first quarter at an average Nymex price of $4.05/Mcf. The price contracts include a gain of 18 cents/Mcf that will be recognized in April-December 2003 related to contract terminations and hedge redesignations.

From April through June 2003, XTO has 400 MMcf/d hedged at an average price of $3.87/Mcf. From July through December 2003, XTO will have 350 MMcf/d hedged at $3.87/Mcf. And in 2004, XTO has 75 MMcf/d hedged at an average price of $3.88/Mcf.

“With more than 90% of our expected gas production for the remainder of 2002 hedged at a Nymex price between $3.64 to $3.84 and more than 70% secured for 2003 at $3.93, we have substantially assured our production growth and financial performance for the next year,” said Bob R. Simpson, CEO.

Steffen E. Palko, XTO’s president, said the hedging program has realized “extraordinary returns” on the company’s development capital and has fueled its current double-digit growth.

XTO was one of the few companies that appeared to have upped its production about 10% compared with the third quarter of 2001, according to a survey by Raymond James analysts (see related story). Its reserves are concentrated in Texas, Oklahoma, Kansas, New Mexico, Arkansas, Wyoming, Alaska and Louisiana.

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