XTO Announces Record Production, Cash Flow for Q4

XTO Energy Inc. reported record fourth quarter 2006 production of 1.580 billion cubic feet equivalent (Bcfe) per day, up 11% from the fourth quarter 2005 level of 1.418 Bcfe per day. Total revenues for the fourth quarter were a record $1.199 billion, a 2% increase from $1.177 billion the prior year. Earnings for the quarter were $429 million, or $1.17 per share ($1.16 diluted), a 5% decrease from fourth quarter 2005 earnings of $453 million, or $1.25 cents per share ($1.22 cents diluted). After adjusting for the after-tax effects of a derivative fair value gain and income tax expense related to enactment of a new State of Texas margin tax, adjusted earnings for fourth quarter 2006 were $423 million, or $1.16 per share ($1.14 diluted). Fourth quarter 2005 adjusted earnings were $440 million, or $1.21 cents per share ($1.18 cents diluted).

Operating income for the quarter was $707 million, a 6% decrease from fourth quarter 2005 operating income of $750 million. Operating cash flow, defined as cash provided by operations, before changes in operating assets and liabilities and exploration expense, was a record $910 million, up 21% from 2005 fourth quarter comparable operating cash flow of $755 million.

The Company set quarterly production records for all products. Fourth quarter daily gas production averaged 1.230 billion cubic feet (Bcf), up 12% from fourth quarter 2005 daily production of 1.102 Bcf. Excluding the effects of the distribution of Hugoton Royalty Trust (HGT) units to shareholders, daily production for the quarter would have increased by an additional 37 million cubic feet equivalent (MMcfe) per day. Daily oil production for the fourth quarter was 45,997 barrels, a 10% increase from the fourth quarter 2005 level of 41,976 barrels. During the quarter, natural gas liquids production was 12,365 barrels per day, a 16% increase from the prior year quarter rate of 10,643 barrels per day.

"Consistent with our history of growth and exceptional shareholder returns, we are proud to announce another record year for XTO Energy. Production volumes increased by about 15% for the year, exceeding our original projections of 10 - 12%, and drove record profitability on record revenues," noted Bob R. Simpson, Chairman and Chief Executive Officer. "As we move ahead, the long-term outlook for strong performance is better than ever. We own a robust drilling inventory in excess of 100% of booked reserves. Our focus on commodity price realizations through timely hedging is securing the revenues to fund our development programs and also, pursue the right bolt- on acquisitions. Our advantage in capital efficiency positions XTO to continue its sector leadership in growth and economic returns."

Keith A. Hutton, President, further commented, "Our development program delivered another strong year of performance in 2006 with proved reserves now expected to exceed more than 8.5 Tcfe. Importantly, this growth was achieved at drill bit finding costs per Mcfe that are expected to be between $1.50 and $1.65, reflecting exceptional economics on our low-risk inventory. XTO's proven growth programs beat our expectations in all operating areas. In the Eastern Region, the Freestone Trend grew production 14%, while successfully validating 20-acre infill drilling inventory and horizontal drilling potential in the Cotton Valley Limestone. Barnett Shale drilling activities increased production by about 50% during the year, maintaining the Company's position as the second largest producer in the play. In the Permian Region, volumes grew by almost 20% as we applied better recovery techniques, via lateral drilling and modified completions, in our legacy reservoirs. In the San Juan and Mid-Continent Divisions, drilling programs in our multiple coal bed methane basins, the evolving shale plays and our established Arkoma programs are paving the way for steady growth, while establishing new inventory for the future. In 2007, we look forward to another record year of production volumes and proved reserves."

The average realized gas price for the quarter was $7.82 per thousand cubic feet (Mcf), 14% lower than the fourth quarter 2005 average price of $9.09 per Mcf. The fourth quarter average oil price increased 22% to $60.57 per barrel from the fourth quarter 2005 average price of $49.59 per barrel. Natural gas liquids prices averaged $33.57 per barrel for the quarter, a 16% decrease from the 2005 fourth quarter average price of $39.83.

For the year, the Company reported record earnings of $1.86 billion, or $5.10 per share ($5.03 diluted), compared with earnings of $1.152 billion or $3.21 per share ($3.15 diluted) for 2005. Included in 2006 earnings are a $469 million gain ($295 million after-tax) on the distribution of HGT units and $34 million of income tax expense related to enactment of a new Texas margin tax. After adjusting for the after-tax effects of these items as well as for a derivative fair value gain, 2006 adjusted earnings were a record $1.534 billion, or $4.21 per share ($4.15 diluted) compared to 2005 adjusted earnings of $1.16 billion, or $3.24 per share ($3.17 diluted). Operating cash flow in 2006 was a record $3.078 billion, up 35% from the prior year level of $2.276 billion. Total revenues for 2006 were $4.576 billion, a 30% increase from revenues of $3.519 billion for 2005. Operating income for the year was $2.672 billion, a 36% increase from $1.963 billion for 2005.

Gas production for the year was a record 1.186 Bcf per day, up 15% from 2005 daily production of 1.033 Bcf. Oil production for 2006 averaged a record 45,041 barrels per day, a 15% increase from 2005 production of 39,051 barrels per day. Natural gas liquids production for 2006 was a record 11,854 barrels per day, a 13% increase from 2005 production of 10,445 barrels per day.

The average realized gas price for 2006 was $7.69 per Mcf, up 9% from the 2005 average price of $7.04 per Mcf. The average oil price for the year was $60.96 per barrel, a 30% increase from the 2005 average price of $47.03 per barrel. Natural gas liquids averaged $37.03 per barrel, or 9% higher than the 2005 average of $34.10 per barrel.

XTO Energy Inc. is a domestic energy producer engaged in the acquisition, development and discovery of quality, long-lived oil and natural gas properties in the United States. Its properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana and Mississippi.