part two

Mr. Davidson went on to say, "Initial results from our Texas Haynesville drilling program are very positive, and we anticipate more results in the near future. In addition, we look forward to resuming our deepwater Gulf of Mexico exploration program with drilling to start on two significant tests at Deep Blue and Double Mountain in the fourth quarter. We also made important progress on our long-term growth projects, sanctioning oil projects at Aseng and Isabela/Santa Cruz and moving forward the development plans at Tamar offshore Israel. Our financial and operating results for the quarter provide us with a lot of momentum as we approach the end of the year."

Total sales volumes averaged 217 thousand barrels of oil equivalent per day for the quarter, up three percent from the third quarter of 2008 primarily as a result of increased volumes in the United States and West Africa. Domestically, higher volumes were supported by ongoing development activity at Wattenberg, the return to full production of Ticonderoga, and the impact of the Raton gas project in the deepwater Gulf of Mexico. Greater natural gas volumes in West Africa were largely related to a lesser amount of facility maintenance downtime. North Sea volumes were down from the third quarter 2008 mainly due to Dumbarton performance.

Commodity price realizations for the quarter were down from the similar period last year. The Company's global crude oil and natural gas prices averaged $63.36 per barrel and $2.41 per thousand cubic feet during the third quarter 2009. Third quarter 2009 crude oil realizations were reduced $1.89 and $5.32 per barrel in the United States and West Africa, respectively, as a result of previously deferred hedge losses.

Cash costs, including lease operating, production and ad valorem taxes, transportation, and G&A were $9.22 per barrel of oil equivalent (Boe) for the quarter versus $11.44 per Boe for the same period in 2008. Lease operating expenses (LOE) averaged $4.41 per Boe, down 13 percent from the third quarter of 2008. The majority of the variance in LOE related to continued cost cutting measures, fewer workover activities onshore in the U.S., and reduced process handling fees in the deepwater Gulf of Mexico. Production taxes significantly declined as a result of lower realized commodity prices. G&A expenses also decreased from the prior period related mostly to incentive compensation. In addition, exploration expense was down from the third quarter of 2008 due to continued drilling success and lower seismic expenditures.