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Production volumes: Lower crude oil and natural gas production volumes reduced exploration and production revenues from continuing operations in 2003 compared with 2002 by $425 million. In 2002, crude oil production was higher than in 2001 and natural gas production was lower. The net effect of these volume changes was an increase in revenues of $100 million. The Corporation’s net daily world- wide production was as follows: 

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*ReGLYPH<223>ects natural gas production converted on the basis of relative energy content (six Mcf equals one barrel). 

The Corporation’s oil and gas production, on a barrel of oil equivalent basis, decreased to 373,000 barrels per day in 2003 from 451,000 barrels per day in 2002. Approximately 60% of this decline was due to asset sales and exchanges. The remainder was principally due to natural decline, disap- pointing results from fields acquired in the United States in 2001 and reduced production from the Ceiba Field in Equa- torial Guinea. The Corporation anticipates that its 2004 pro- duction will be approximately 13% below 2003 production of 373,000 barrels of oil equivalent per day. Approximately 16,000 barrels per day of the expected decrease is due to asset sales and exchanges in 2003 and the remainder is principally due to natural decline. 

Operating costs and exploration expenses: Operating costs and exploration expenses from continuing operations increased by approximately $70 million and $330 million in 2003 and 2002 compared with the corresponding amounts in the prior years. 

Production expenses increased in 2003 primarily due to the weakening of the U.S. dollar, which increased costs incurred in foreign currencies and resulted in higher expenses than in prior years. Production expenses in 2003 also reflect higher employee benefit, transportation and maintenance costs. Production expenses in 2002 were higher than in 2001 due to increased production from higher cost fields, workovers and other maintenance, and higher production volumes. Depreciation, depletion and amortiza- tion charges were lower in 2003 than in 2002, reflecting decreased production volumes and lower depreciable costs resulting from impairments in 2002. Depreciation and related charges were higher in 2002 compared to 2001, due to higher unit costs from amortization of the purchase prices of fields in Equatorial Guinea, Colombia and the United States and increased production volumes. Explo- ration expense was higher in 2003, reflecting increased activity in the United States and Equatorial Guinea, as well as additional lease cost amortization. Exploration expense decreased in 2002 compared with 2001, principally reflect- ing improved drilling results. 

The Corporation’s total unit cost per barrel of oil equivalent produced increased in 2003 and 2002 compared with 2001. Unit cost per barrel includes production expense, deprecia- tion, depletion and amortization, exploration expense and administrative costs. Unit costs per barrel totaled $17.32 in 2003, $15.11 in 2002 and $13.11 in 2001. The Corporation estimates that its 2004 unit costs will approximate the 2003 amount. 

Other: After-tax foreign currency losses amounted to $22 million ($4 million before income taxes) in 2003 com- pared with income of $6 million ($26 million before income taxes) in 2002 and a loss of $17 million ($21 million before income taxes) in 2001. 

