Most independents reported record revenues and stellar production figures for the first quarter of this year, according to Oil and Gas Investor This Week's scoreboard of 35 producers' results. Companies in the production winners' circle in the first quarter included Noble Energy, Chesapeake Energy and XTO Energy Inc. with gains of 70%, 31% and 21%, respectively, compared with the same period last year. Losers included Forest Oil Corp. and Stone Energy Corp.-which was at the center of a bidding war between Energy Partners Ltd. and Plains Exploration & Production Co. at press time-with losses of 25% each. Morgan Stanley E&P analyst Lloyd Byrne says Noble is on the right track. "We continue to see unrecognized value in the shares today and believe that Noble's current peer group discount is inconsistent with the company's quality of assets, above-average growth potential and premium returns on capital. Should market recognition fail to materialize, we continue to expect strategic initiatives such as divesting noncore assets and would like to see share buybacks initiated." As for XTO, he says its Freestone and Barnett drilling programs will be significant contributors to 2006 volume growth. "Increased growth capex, acquisitions and buybacks are all options...Visible production growth, a multi-year drilling inventory, and top-quartile margins/returns continue to underpin the story, in our view." Despite industry-wide cost pressures, including rising dayrates, Chesapeake reported its highest upstream quarterly operating margin in the first quarter of 2006 since 2001. "The question is, how much can Chesapeake hold onto?" Byrne asks. In earnings per share, Chesapeake and XTO topped the chart again along with Pioneer Natural Resources, with gains of 300%, 168% and 638%, respectively, compared with the same period last year. First-quarter findings were similar for London-based research firm Evaluate Energy's universe of independents. Analysts Hannah Mumby and Eoin Coyne report the group's first-quarter 2006 performance was good, compared with first-quarter 2005 and flat in comparison with the fourth quarter results. Return on average capital employed increased for most companies in first-quarter 2006, they add. Kerr-McGee Corp. experienced a sharp increase from 10.2% in first-quarter 2005 to 40.8% in first-quarter 2006. "The reason for this large shift is the income obtained from divestments in the North Sea and U.S. in the fourth quarter of 2005...EOG Resources Inc. has also achieved a large shift in ROACE due to strong organic income growth during the past year as the company's performance benefited from increased production, coupled with a strong price environment." Divestitures took their toll on oil production figures for some. Kerr-McGee and Anadarko Petroleum Corp. are examples. They experienced declines of 44% and 10%, respectively, due largely to divestments during 2005. Some companies saw their oil production jump thanks to acquisitions, such as Noble. Its oil production climbed 56% thanks to its Patina Oil & Gas acquisition. As for gas, production for the Evaluate Energy group increased 7% quarter-on-quarter, and increased for the second quarter in succession, following the production slowdown due to hurricanes in third-quarter 2005. Decreases in gas production were also prompted by divestitures, as with Murphy Oil Co. and Kerr-McGee, the analysts report.

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