Sep. 24--XTO Energy, one of the nation's most successful independent natural gas and oil producers, has already moved to lock in solid profits for next year by entering into hedging contracts for about 55 percent of its projected 2010 production.

The Fort Worth-based company said Wednesday that it has hedged about 1.25 billion cubic feet per day of natural gas production and 70,000 barrels per day of oil production for 2010, at cumulative prices equivalent to $9.62 per 1,000 cubic feet of natural gas. XTO is predominantly a natural gas producer but also has substantial oil production.

The company hedged about half of its 2010 gas production at $7.49 per 1,000 cubic feet and 95 percent of its oil production at $95.70 a barrel, said Tom Covington, XTO vice president for investor relations. Those prices are far above current market levels. In futures trading Wednesday on the New York Mercantile Exchange, gas for October delivery settled at $3.86 per million British thermal units and oil for November delivery settled at $69.07 a barrel.

The hedged prices that the company has locked in "secure robust cash margins and cash flow" for XTO, "while allowing us to participate in an improving natural gas market next year," XTO Chairman Bob Simpson said.

Natural gas prices soared above $13 in July 2008 but plunged below $3 before making a recent modest rebound. Producers generally say a sustained price of $6 to $8 is needed to stimulate a significant uptick in drilling activity.

Hedging has helped XTO greatly on its production for the second half of 2009. The company hedged about 92 percent of its oil at $117.11 per barrel and 76 percent of its natural gas at $8.79 per 1,000 cubic feet, Covington said.

Significant Bakken well

The company also announced on Wednesday strong production results from an oil well, the Jorgenson 43X-04, in the Bakken Shale play in North Dakota. The well drilled in the Three Forks/Sanish geological formation was completed at an initial daily production rate equivalent to 2,700 barrels, XTO said.

"The Jorgenson well sets a new standard for our Three Forks/Sanish program," XTO CEO Keith Hutton said. The company plans to double its number of drilling rigs in the Bakken to six as it moves into 2010, he said.

During an August conference call with analysts, Hutton said that a typical Three Forks/Sanish well costs about $4.5 million to drill and complete, while yielding an estimated 400,000 to 600,000 barrels of oil during its producing lifetime.

Just as has been the case with natural gas drilling in the Barnett Shale in North Texas, energy companies are relying on technological advances in horizontal drilling and hydraulic fracturing to greatly boost oil production in the Bakken Shale.

XTO stock (ticker: XTO) closed Wednesday at $42.48 a share, down 35 cents.

JACK Z. SMITH, 817-390-7724

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