XTO Grows Production, Operating Cash Flow in 2008

XTO Energy has reported record production for fourth quarter 2008 of 2.64 billion cubic feet equivalent (Bcfe) per day, up 29% from the fourth quarter 2007 level of 2.05 Bcfe per day, and up 11% sequentially from 2.39 Bcfe per day in third quarter 2008. Total revenues for the fourth quarter were a record $1.96 billion, a 23% increase from $1.59 billion the prior year. Earnings for the quarter were $351 million, or $0.61 per share ($0.61 diluted), a 24% decrease from fourth quarter 2007 earnings of $464 million, or $0.96 per share ($0.95 diluted). After adjusting for the after-tax effects of a $39 million non-cash derivative fair value gain and an $81 million impairment of proved properties, adjusted earnings for fourth quarter 2008 were $393 million, or $0.68 per share ($0.68 diluted). Fourth quarter 2007 adjusted earnings were $465 million, or $0.96 per share ($0.95 diluted).

Operating income for the quarter was $709 million, a 13% decrease from fourth quarter 2007 operating income of $813 million. Operating cash flow, defined as cash provided by operations, before changes in operating assets and liabilities and exploration expense was $1.32 billion, up 14% from 2007 fourth quarter comparable operating cash flow of $1.16 billion.

Fourth quarter daily gas production averaged 2.17 billion cubic feet (Bcf), up 30% from fourth quarter 2007 daily production of 1.67 Bcf. Daily oil production for the fourth quarter was 63.5 thousand barrels, a 30% increase from the fourth quarter 2007 level of 48.8 thousand barrels. During the fourth quarter, natural gas liquids production was 15.4 thousand barrels per day, a 7% increase from the fourth quarter 2007 rate of 14.5 thousand barrels per day.

"Despite the volatility and extremes of 2008, XTO Energy reported another record year of performance for our shareholders. Daily production and proven reserves grew by 28% and 23%, respectively. Operating cash flow increased by 37% as the cash margin per Mcfe expanded to $6. From an acquisition perspective, the Company fortified its potential for long-term growth, with compelling economic returns, through an expansive addition of properties in the most prolific growth basins across the country," stated Bob R. Simpson, Chairman and Founder.

"Looking ahead, we have hedged 80% of projected production volumes at an equivalent price of about $10.70 per Mcfe to protect our financial returns in 2009. Given these commodity hedges and even with the current price environment, we anticipate another record year of cash flow generation. Our capital budget of $3.2 billion is designed to deliver efficient growth of 14% for the year, while building the infrastructure needed for the future."

"Operational results highlight the ongoing success of our numerous growth platforms in tight-sand and shale basins. In East Texas, the Freestone Trend grew to an average gross rate of 756 MMcf per day, up 6.2% from the prior quarter. In this field, two horizontal Cotton Valley Lime wells, the Gail King 28H and 37H, were completed at daily rates of 13 MMcf and 12 MMcf, respectively. Initial success in our Haynesville Shale program is reported with the completion of the New Horizons 1 well which has delivered a steady daily rate over 8 MMcf for its first two weeks of production. This discovery Haynesville well opens up our highly prospective acreage in western Panola County of Texas for development. For the quarter, Barnett Shale production increased by 14% to reach a net daily rate of 554 MMcfe. Our development programs in the Woodford and Fayetteville plays are underway with a combined 30 wells drilled during the quarter and combined net production over 90 MMcf per day. Finally, in the Bakken Shale of North Dakota, a new Three Forks/Sanish well was completed at an initial daily rate of 1,300 barrels of oil equivalent," stated Keith A. Hutton, Chief Executive Officer.

"Across the board, our high margin development opportunities represent extraordinary captured value. With the state of the industry today, the XTO directive is to manage growth and maximize economic returns into falling costs."

The average realized gas price for the quarter was $6.79 per thousand cubic feet (Mcf), 10% lower than the fourth quarter 2007 average price of $7.53 per Mcf. The fourth quarter average oil price increased 13% to $85.19 per barrel from the fourth quarter 2007 average price of $75.47 per barrel. Natural gas liquids prices averaged $29.46 per barrel for the quarter, a 48% decrease from the 2007 fourth quarter average price of $56.64.

For the year, the Company reported record earnings of $1.91 billion, or $3.60 per share ($3.56 diluted), compared with earnings of $1.69 billion, or $3.58 per share ($3.53 diluted) for 2007. After adjusting for the after-tax effects of a $46 million non-cash derivative fair value gain and an $81 million impairment of proved properties, 2008 adjusted earnings were $1.95 billion, or $3.66 per share ($3.62 diluted) compared to 2007 adjusted earnings of $1.72 billion, or $3.64 per share ($3.59 diluted). (1) Operating cash flow in 2008 was a record $5.13 billion, up 37% from the prior year level of $3.74 billion. (1) Total revenues for 2008 were a record $7.70 billion, a 40% increase from revenues of $5.51 billion for 2007. Operating income for the year was $3.51 billion, a 21% increase from $2.89 billion for 2007.

Gas production for the year was a record 1.91 Bcf per day, up 31% from 2007 daily production of 1.46 Bcf. Oil production for 2008 was a record 56.0 thousand barrels per day, a 19% increase from 2007 production of 47.0 thousand barrels per day. Natural gas liquids production for 2008 was a record 15.6 thousand barrels per day, a 15% increase from 2007 production of 13.5 thousand barrels per day.

The average realized gas price for 2008 was $7.81 per Mcf, up 4% from the 2007 average price of $7.50 per Mcf. The average oil price for the year was $87.59 per barrel, a 25% increase from the 2007 average price of $70.08 per barrel. Natural gas liquids averaged $48.76 per barrel, or 7% higher than the 2007 average of $45.37 per barrel.
 

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