Natural gas producer XTO Energy’s (XTO) first quarter results came in better than expected, primarily due to a rise in production volumes. Earnings per share, excluding non-cash derivative fair value gain, came in at 55 cents, beating the Zacks Consensus Estimate of 47 cents.

However, comparisons (for the reported quarter) with the year-earlier period were not favorable, reflecting lower gas prices. XTO’s adjusted earnings per share fell approximately 39.6% (from 91 cents to 55 cents), while revenues decreased 7.4% (from $2.2 billion to $2.0 billion). During the quarter, operating income was down 25.5% to $656 million, while cash flow from operations fell 16.2% to $1.2 billion.

Volume Analysis

Production during the quarter increased 6.3% year over year to 2.9 billion cubic feet equivalent (Bcfe) per day. Average daily gas production increased 7.6% year over year to 2.4 billion cubic feet (Bcf), while daily natural gas liquids (NGL) production was up 9.2% year over year to 19,980 barrels. However, daily oil production fell 2.0% year over year to 64,327 barrels.

Realized Prices

Natural gas equivalents average realized price for the quarter was $7.59 per thousand cubic feet equivalent (Mcfe), down 11.5% from the prior-year level. The average price realization of natural gas during the quarter decreased 12.3% year over year to $6.35 per thousand cubic feet (Mcf), while the average oil price for the quarter fell 11.6% year over year to $92.49 per barrel. On the other hand, average NGL price realization was up 81.1% to $43.18 per barrel.

Capital Expenditure & Balance Sheet

During the quarter, XTO spent $670 million on capital expenditures, as against $1.1 billion in the year-ago period. As of Mar 31, 2010, the company had long-term debt (including current maturities) of $10.2 billion, representing a debt-to-capitalization ratio of 36.4% versus 37.7% as on Dec 31, 2010.

Note: XTO is currently in the process of being acquired by ExxonMobil Corporation (XOM) in an all-stock deal worth $31 billion, excluding debt. The transaction is valued at $41 billion, including about $10 billion in XTO debt, and is based on the Dec 11, 2009 closing share prices in both the companies. Completion of the transaction is expected in the second quarter of 2010.
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