Natural gas producer XTO Energy’s (XTO) fourth quarter results came in better than expected, primarily due to a rise in production volumes. Earnings per share, excluding non-cash derivative fair value loss, came in at 93 cents, 7 cents ahead of the Zacks Consensus Estimate and 25 cents more than the prior-year period.

Revenue was up 19.4% to $2.3 billion. During the quarter, operating income increased 39.5% to $989 million, while cash flow from operations was up 27.8% to $1.7 billion.

Estimates Surprise Trend & Outlook

It was the company’s fourth consecutive positive earnings surprise. XTO has performed consistently well during this period, with its average earnings surprise being 9%. This implies that the company has beaten the Zacks Consensus Estimate by 9% over the last four quarters.

Looking ahead, the current Zacks Consensus Estimates for the first quarter and full-year 2010 are profits of 49 cents and $2.21, respectively. The overall trend in estimate revisions is favorable. Though there were no estimate revisions in either direction over the last 7 days, 1 (out of 15) analysts have increased their first quarter projections, while 6 (out of 25) analysts increased their full-year 2010 projections during the past month. There were no downward revisions for the quarter though 2 analysts reduced their full-year 2010 estimates during the past 30 days.

Volume Gains Continue

Production during the quarter increased 9.2% year over year to 2.9 billion cubic feet equivalent (Bcfe) per day. Average daily gas production increased 9.3% year over year to 2.4 billion cubic feet (Bcf), daily oil production increased 1.6% year over year to 64,563 barrels and daily natural gas liquids (NGL) production increased 37.1% year over year to 21,159 barrels.

Realized Prices Up

Natural gas equivalents average realized price for the quarter was $8.76 per thousand cubic feet equivalent (Mcfe), up 12.5% from the prior-year level. The average price realization of natural gas during the quarter increased 7.4% year over year to $7.29 per thousand cubic feet (Mcf), whereas average NGL price realization was up 32.6% to $39.07 per barrel. The average oil price for the quarter increased 30.1% year over year to $110.85 per barrel.

Capital Expenditure & Balance Sheet

During the quarter, XTO spent $625 million on capital expenditures, bringing the full-year 2009 total to $3.2 billion. As of Dec. 31, 2009, the company had long-term debt of $10.5 billion, representing a debt-to-capitalization ratio of 37.7% versus 37.4% as on Sep. 30, 2009.

Year-End Proved Reserves

As of year-end 2009, XTO had a record 14.83 trillion cubic feet equivalent (Tcfe) in proved reserves, of which more than 84% was natural gas and nearly 61% was developed. This was 7% above the year-earlier level. In 2009, XTO replaced 192% of its production at a cost of $1.63 per thousand cubic feet equivalent (Mcfe). XTO’s finding costs for organic reserve additions were in the range of $1.62 per Mcfe.

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