On top of strong revenues, independents also finished the third quarter with much higher production than in the year-before quarter. Of the 36 producers in Petroleum Finance Week newsletter's universe of independents, all but a handful reported increased oil and/or gas output. Analysts predict more strong results-as long as commodity prices stay high. Among those with lagging production figures are some Gulf of Mexico producers who were affected by Hurricane Ivan-related shut-ins. In some instances, production facilities were not harmed significantly, but pipelines were, resulting in continued shut-in of output. Gas-focused Ultra Petroleum reported significantly higher production. Sterne, Agee & Leach's E&P analyst, Michael Bodino, says, "Production growth was fueled by a 21% stronger commodity price and a flat cost structure as it continues a steady, low-cost development drilling program on the Pinedale Anticline." (For more on Ultra's activities, see "Pumped Up on the Pinedale" in this issue.) Plains Exploration & Production enjoyed operational success at Deep Inglewood, Point Arquello and San Joaquin Valley, all of which should lead to cost-efficient production growth in 2005 and beyond, says Jim Flores, chief executive. With a bumped-up capex budget, the company expects 2005 production to be approximately 10% greater than the second-half 2004 average. Arkansas-based Murphy Oil is enjoying the fruits of successful exploration in the third quarter. Jacques Rousseau of Friedman Billings Ramsey raised his target price on Muphy's stock to $90 per share, "reflecting our positive view of the company's exploratory success and of the robust near-term drilling program, which we believe should continue to act as a major near-term catalyst for the stock." He gives credit to existing discoveries-Kikeh, Kakap, Kenarong, Pertang and Senangin-in Malaysia, and to the risked potential upside from near-term drilling activities there and in the deepwater Gulf of Mexico. "We must note that our assumptions are based on a conservative 30% success rate in Malaysia-above a 10% industry average, but below Murphy's solid 50%-plus track record-and 10% in the Gulf," he adds. XTO Energy had 2004 production growth of 29% through third-quarter 2004 due to both its drillbit and acquisition activities. Barry Borak, an analyst with Foresight Research Solutions, expects a further 21% production gain in 2005. "While the overwhelming share of (2004) volume growth has been acquisition-related, the integration of large acquisitions continues to proceed smoothly. XTO's ability to consistently grow production on a debt-adjusted-share basis remains a key valuation metric," he says. He adds that he would like to see stepped-up drillbit activity by XTO. Its inventory of proved undeveloped reserves totals 1.5 trillion cubic feet equivalent, and its probable reserves total more than 2 trillion. Lloyd Byrne, an analyst with Morgan Stanley, says that the company's ability to reinvest free cash flow, grow production and reserves and control costs continues to define XTO as a "have" in his book. Further, its ability to leverage its acquisitions is key as the industry continues to have an eye out for pristine credit management and execution records. Brad Beago, an analyst with Calyon Securities (USA) Inc., says Range Resources' large, long-life reserve base, coupled with a huge foundation of low-risk exploitation projects, should yield steady, predictable growth and strong rates of return. He anticipates 16% production growth in 2005. As for Denbury Resources, Beago says the company is now in the best financial position in years. "Net debt-to-cap is only 17%." Hybrid driller/producer Unit Corp. is on track to more than replace 150% of its annual production, having drilled 110, or 12%, more wells through third-quarter 2004 than the prior year. -Bertie Taylor