In anticipating the integrateds' fourth-quarter results, analysts had high hopes for increased production figures. Most delivered higher earnings, on the basis of stronger commodity prices, yet most fell short of the mark on production. Jacques Rousseau, an analyst with Friedman Billings Ramsey, says, "We estimate that integrated oil stocks are only 'pricing in' $29-per-barrel crude oil, well below our $33-per-barrel mid-cycle assumption. Combining this with our expectation for continued high commodity prices, we believe 2005 should be another year of strong earnings for the sector." He maintains Overweight ratings on the integrated-oil group, with Outperform-rated ConocoPhillips, ExxonMobil, Murphy Oil Corp. and Total as his top picks. Deutsche Bank analyst Paul Sankey puts Amerada Hess in the turnaround category with a Buy rating on its stock. "...Our long-standing belief in the turnaround story is underlined by fundamentals that are now visibly improving," Sankey said. Hess reported 110% reserves replacement and this was the first time in years that organic exploration has replaced production. At press time, he had a $97 target on the stock. Prudential Securities analyst Michael Mayer rates BP shares Neutral, and has a $60 target on the stock. Production inched upward 4%, thanks to the acquisition of TNK last year. ChevronTexaco reported dips in production but improvement in earnings. Worldwide production was down 9% (oil output down 8%; gas output down 11%). Mayer says ConocoPhillips is his top choice among the major oils. The stock is trading at only 6.8 times normalized cash flow, he says. "Over the past five years, the company has consistently generated above-average upstream returns [and] significantly improved its balance sheet and raised its dividend." Rousseau has an Outperform rating and $111 target on ConocoPhillips shares. "The company forecasts production volumes of approximately 1.62 million barrels equivalent per day this year, which represents about a 4% increase over 2004 levels," Rousseau says. "This total could increase up to 50,000 barrels per day annually, in our view, if the company were able to reenter Libya." Management plans to use free cash flow to increase the capital program, acquire more Lukoil shares, reduce debt by about $1 billion per year, increase the dividend to maintain a competitive yield and repurchase shares. Marathon Oil missed the mark on production. U.S. output was down (oil down 34%, gas down 21%) and international production was up (oil up 9%, gas up 7%). Estimates are that 2005 production will be 350,000 barrels equivalent per day, slightly more than the 337,000-barrel-per-day average in 2004. Mayer maintains an Overweight rating on the stock with a target price of $42. "Marathon's improvement in its production replacement ratio, although aided by revisions, is indicative of an improving trend, although the company has not yet disclosed the finding and development costs associated with this result," he said.