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MESA'S PICKENS SEES SIGNS U.S. GAS SURPLUS MAY BE SHRINKING, BUT...

Oct. 5, 1992

Rising wellhead prices may mean the natural gas surplus that has plagued the U.S. petroleum industry is shrinking because of sliding deliverability and increasing demand. But that doesn't mean gas producers can be certain of better times ahead. So says Boone Pickens, chief executive officer of MESA Inc., Dallas. "It's clear we hit bottom early this year," Pickens said. "What's not so clear is whether the recent increase in prices will hold long term and return to levels necessary

Rising wellhead prices may mean the natural gas surplus that has plagued the U.S. petroleum industry is shrinking because of sliding deliverability and increasing demand.

But that doesn't mean gas producers can be certain of better times ahead.

So says Boone Pickens, chief executive officer of MESA Inc., Dallas.

"It's clear we hit bottom early this year," Pickens said. "What's not so clear is whether the recent increase in prices will hold long term and return to levels necessary to support a viable domestic industry."

Pickens also cited an increase in allowables in Kansas Hugoton gas field as a sign of a closer fit between supply and demand.

"The increase in Hugoton allowables is another indication that supply may be getting tighter going into the winter," Pickens said.

WELLHEAD PRICES

MESA will receive an average of about $2.25/Mcf for U.S. gas production during October after deducting transportation costs.

The average price reflects spot sales as well as gas sold at fixed prices and under term arrangements. On an adjusted basis, the average price is equal to about $2.35/MMBTU.

MESA's spot prices slumped to a 15 year low of $1/Mcf earlier this year. The company's gas prices have declined each year since 1983, when its average price peaked at $2.92/Mcf.

Excluding gains realized by hedging on the futures market, MESA's 1991 average price was $1.46/Mcf, and the average price for first half 1992 was $1.47/Mcf.

Prices for gas produced in October from the company's Hugoton leases will average about $2.35/Mcf, Pickens predicted. Hugoton field, in Southwest Kansas, accounts for about 60% of MESA's nearly 2 tcf of equivalent natural gas reserves.

Mesa said the Kansas Corporation Commission increased the October 1992-March 1993 winter allowable for Hugoton field to 298 bcf. That is up from 262 bcf in the 1991 winter and 276 bcf in the same 1990 period.

MESA expects its net production from Hugoton field during October to be about 130 MMcfd. The company's total net production in October is expected to average 240 MMcfd.