Oil and gas producer XTO Energy Inc. (XTO) reported Wednesday a decline in third-quarter profit, reflecting lower average selling prices, despite strong growth in revenues and production. Quarterly adjusted earnings per share fell from last year, yet topped the market projections, with revenue also beating Street view. Further, the Fort Worth, Texas-based company provided fourth-quarter production forecast, and also lifted its targeted annual production growth for 2009.
Third-quarter net income dropped 4% to $500 million or $0.86 per share from prior year's $521 million or $0.94 per share. The latest quarter results included $9 million non-cash derivative fair value loss, compared to prior year's loss of $24 million.
Excluding the derivative loss, adjusted earnings were $509 million or $0.87 per share, compared to $545 million or $0.98 per share in the prior year quarter.
On average, 29 analysts polled by Thomson Reuters expected the company to report earnings of $0.84 per share. Analysts' estimates typically exclude special items.
Total revenues grew 8% to $2.29 billion from $2.13 billion in the same quarter a year ago, and beat seventeen Wall Street analysts' consensus estimate of $2.23 billion. In the quarter, revenues from gas and natural gas liquids rose to $1.61 billion from prior year's $1.59 billion, and Oil and condensate revenues grew to $654 million from $495 million a year ago.
The company's total equivalent production was 2.95 billion cubic feet equivalent, or Bcfe, per day in the quarter, up 23% from last year's production of 2.39 Bcfe per day, and up 2% from 2.89 Bcfe per day in the second quarter 2009. Third-quarter daily gas production averaged 2.42 Bcf, up 24% from production of 1.95 Bcf a year ago. Daily oil production for the quarter was 65,822 barrels, a 14% increase from prior year's 57,637 barrels. Natural gas liquids production climbed 42% to 22,010 barrels per day from the prior year quarter rate of 15,517 barrels per day.
In the third quarter, average sales price of natural gas equivalents fell to $8.33 per thousand cubic feet equivalent, or Mcfe, from prior year's $9.47 per Mcfe. The average realized gas price decreased 18% to $6.93 per thousand cubic feet, or Mcf, from $8.42 per Mcf a year ago. Natural gas liquids prices averaged $30.59 per barrel for the quarter, 43% lower than the 2008 quarter average price of $53.65. Average oil price was $108.04 per barrel, up 16% from last year's average price of $93.40.
The company noted that its operating income for the quarter fell 5% to $919 million from $969 million in the previous year. Operating cash flow was $1.56 billion, up 3% from $1.52 billion in the prior year.
Commenting on the results, Bob Simpson, chairman and founder, stated, "Notwithstanding volatile natural gas markets, XTO reported another quarter of record production and cash flow, demonstrating our ability to grow efficiently through the cycles. The impact of our 2008 investment and our 2009 capital program was evident during the quarter. Our disciplined internal focus on costs and returns leaves us on track for cash flow near $6 billion, more than 15% above year ago levels.
In its preceding second quarter, XTO Energy had reported a 14% decline in net earnings of $496 million or $0.85 per share, as lower oil and gas prices as well as higher expenses offset a 32% increase in production. Adjusted earnings declined to $509 million or $0.87 per share from $553 million or $1.06 per share in the the year-ago quarter. Revenue for the quarter climbed 17% from the year-ago period to $2.27 billion.
Among other oil and gas producers, Houston, Texas-based Apache Corp. (APA) last week reported a steep decline in third-quarter profit, as oil and gas prices fell from last year. The energy company's net income attributable to common stock was $440.6 million, or $1.30 per share, compared with $1.19 billion or $3.52 per share in the prior-year period. On an adjusted basis, Apache earned $534 million or $1.58 per share, lower than $1.1 billion or $3.19 per share last year. Revenue for the quarter fell to $2.33 billion from $3.36 billion in 2008.
Woodlands, Texas-based Anadarko Petroleum Corp. (APC) also reported a sharp fall in its third quarter profit on Monday, as revenue dropped mainly as a result of lower energy prices. The Houston, Texas-based company reported net income for the third quarter of $200 million or $0.40 per share, compared to $2.17 billion or $4.58 per share for the year-ago quarter. Adjusted net loss from continuing operations was $51 million or $0.11 per share, compared to income of $765 million or $1.58 per share in the prior year quarter. Revenue and others for the third quarter fell to $2.74 billion from $6.15 billion in the same quarter last year.
For the first nine months of 2009, XTO Energy reported net earnings of $1.48 billion or $2.54 per share, lower than last year's $1.56 billion or $2.96 per share. Adjusted earnings were $1.55 billion or $2.66 per share, compared to earnings of $1.55 billion or $2.95 per share in the previous year. Total revenues for the first nine months grew 17% to $6.72 billion from revenues of $5.73 billion in the same period in 2008.
"Looking towards 2010", Simpson said, "with about 55% of our anticipated production already hedged at $9.62 per Mcfe, we expect to deliver another year of strong financial returns and substantial free cash flow, while generating double-digit production growth."
In a separate statement, XTO Energy provided operational and financial guidance for the remainder of 2009 based on current expectations.
For the fourth quarter, the company's average daily gas equivalent production is estimated to total 2.89 Bcfe to 2.93 Bcfe, and average daily natural gas production is expected to be 2.36 Bcf to 2.40 Bcf. Natural gas liquids production is projected to average 22 million barrels per day, and oil production is expected to be 66 million barrels per day.
Further, XTO Energy raised its targeted annual production growth to 23% for 2009 from previous projection of 20% growth.
Keith Hutton, chief executive officer, added, "We plan to double our rig count to six in 2010. Our early success in the Marcellus Shale has encouraged us to add a second rig and we expect to double our rig count in 2010. Simply put, our substantial acreage position across the major shale plays, in addition to our base conventional acreage, leaves us with a deep, low-cost drilling inventory which we expect to efficiently exploit for years to come."
XTO closed Tuesday's regular trading session at $42.24, up $0.80, on a volume of 5.7 million shares.
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