XTO Energy Announces Record Earnings

XTO Energy Inc. (NYSE: XTO) reported record second quarter 2005 production of 1.303 billion cubic feet equivalent (Bcfe) per day, up 37% from the second quarter 2004 level of 954 million cubic feet equivalent (MMcfe) per day. Total revenues for the second quarter were a record $748.7 million, a 68% increase from $444.7 million the prior year. Earnings for the quarter reached a record $219.7 million, or 61 cents per share, a 122% increase from second quarter 2004 earnings of $99.1 million, or 30 cents per share. After adjusting for the after-tax effects of performance share compensation and derivative fair value loss, adjusted earnings for second quarter 2005 were $220.1 million, or 61 cents per share. Second quarter 2004 adjusted earnings were $134.6 million, or 41 cents per share.

Operating income for the quarter was $385.3 million, a 105% increase from second quarter 2004 operating income of $187.8 million. Operating cash flow, defined as cash provided by operations, before changes in operating assets and liabilities and exploration expense, was a record $478.6 million, up 68% from 2004 second quarter comparable operating cash flow of $285.6 million. See the last page of this release for further explanation and reconciliation of non-GAAP financial measures.

The Company set quarterly records for its oil and gas production. Second quarter daily gas production averaged 1.019 Bcf, up 27% from the second quarter 2004 daily production of 803 MMcf. Daily oil production for the second quarter was 37,022 barrels, a 109% increase from second quarter 2004 level of 17,682 barrels. During the quarter, natural gas liquids production was 10,305 barrels per day, a 38% increase from the prior year quarter rate of 7,463 barrels per day.

"Steady growth through the disciplined combination of development drilling and producing property acquisitions continues to drive record results for XTO. With quarterly production up 37% from 2004, the Company recorded its best financial performance ever. Year over year, revenues, earnings per share and operating cash flow increased by 68%, 103% and 68%, respectively," stated Bob R. Simpson, Chairman and Chief Executive Officer. "With the conviction that commodity prices would remain stronger for longer, over the past 2 years our team has purchased about $4 billion of hand-picked producing properties, rich with development opportunities at compelling economics. The combination of these well-timed acquisitions and our existing development inventory positions XTO for continued growth and prosperity. With a strong drilling program ahead in 2005, we have increased our production growth target for the year to a range of 27-29%."

"This quarter's results reflect outstanding performance from our producing regions where we operated 54 drilling rigs and merged new acquisitions into our operations," noted Keith A. Hutton, President. "In East Texas, the Freestone Trend averaged 480 gross MMcf per day, up about 6% from the first quarter. With the recent completion of pipeline and processing infrastructure projects, we look to a growth target above 730 MMcf per day in Freestone over the next few years. In the Barnett Shale, daily gross gas production hit 165 MMcf, up from 32 MMcf last quarter, making XTO the second largest producer. Our 17 rigs working in this play will continue to drive production growth. In the Permian Region, workover and drilling efforts on the properties acquired in 2004 increased oil production another 4% over first quarter gains. Recent Permian acquisitions from Exxon will add further volume growth and future development opportunities. Overall, from coal bed methane production to tight-gas, to shale, to oil, our team has built a production base positioned to grow - - - with shallow underlying decline, healthy development economics and a prolific low-risk drilling inventory."

The average realized gas price for the second quarter increased 22% to $6.10 per thousand cubic feet (Mcf) from $5.00 per Mcf in second quarter 2004. Natural gas liquids prices averaged $30.29 per barrel for the quarter, 29% higher than the 2004 quarter average price of $23.43. The second quarter average oil price was $43.35 per barrel, an 18% increase from last year's second quarter average price of $36.61.

For the first six months of 2005, the Company reported earnings of $386 million or $1.09 per share, compared with earnings of $193.2 million or 60 cents per share for the same 2004 period. Year-to-date 2005 earnings include the effects of a derivative fair value loss and non-cash incentive compensation. Excluding these items, year-to-date 2005 earnings were $410.5 million, or $1.16 per share compared to year-to-date 2004 adjusted earnings of $253.7 million, or 79 cents per share. Operating cash flow was $888.4 million for the first half of 2005, compared with $550.4 million for the 2004 period. See the last page of this release for further explanation and reconciliation of these non-GAAP financial measures. Total revenues for the first six months of 2005 were $1.4 billion, a 64% increase from revenues of $839.5 million for the same 2004 period. Year-to-date operating income was $671.1 million, an 88% increase from $356.8 million for the first half of 2004.

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