Falling fortune

June 27, 2016
As publisher of the OGJ150 each September, editors at Oil & Gas Journal already have a pretty good idea of which US industry firms are handling the downturn better or worse relative to their peers.

Matt Zborowski
Staff Writer

As publisher of the OGJ150 each September, editors at Oil & Gas Journal already have a pretty good idea of which US industry firms are handling the downturn better or worse relative to their peers. However, with the yearly release of the Fortune 500, we're offered a glimpse via yearly revenue numbers of how the oil and gas industry is faring compared with others in the US.

Reflecting a year in which the oil and gas industry felt the full effect of the prolonged oil-price slump, the number of upstream producers that appear in the top 500 fell to 9 in 2016 from 11 in 2015. Dropping out of the top 500 were Murphy Oil Corp., diving 312 spots to No. 662, and Pioneer Natural Resources Co., down 26 spots to just outside the list at No. 522.

Despite falling below an arbitrary cutoff point, PNR's decline is less precipitous than many producers that remain within the top 500. Murphy, meanwhile, reported a 2015 net loss of $2.271 billion encompassing property impairments at Seal heavy-oil field in Western Canada, and oil and gas fields offshore Malaysia and in the deepwater Gulf of Mexico.

ConocoPhillips remained the largest independent but fell 39 spots to No. 90 among the overall top 500, with profits during the year dropping $4.428 billion. The firm said it plans to pay down its $25-billion debt load during 2016. In second at No. 175 and down just 38 spots was Freeport McMoRan Inc., whose mining operations expand well beyond just oil and gas.

Devon Energy Inc. moved up to third among the producers despite falling just 64 spots to No. 216. Chesapeake remained in fourth after dropping 81 spots to No. 223. Occidental Petroleum Corp. rounded out the top five at No. 225, diving 110 spots from its position in 2015 as the second-largest producer by revenue.

Remaining in the top 500 were oil field services firms Halliburton Co., down 21 spots to 117; and its former merger partner Baker Hughes Inc. at 178, dropping 49 spots. Cameron International Corp., officially acquired by Schlumberger Ltd. this year, fell 44 spots to No. 319; while FMC Technologies Inc., after recently agreeing to be acquired by Technip SA, dropped 53 spots to No. 410.

Boom-to-bust: Oil City USA

Including the two oil field services firms that are joining forces with the French, six of the nine firms mentioned above are headquartered in the nation's energy capital of Houston. Including the northern suburb of The Woodlands, Houston claims 24 firms across all industries in the Fortune 500, second only to New York City.

The new tally is down 2 from last year due in part to KBR Inc. falling to No. 501 from No. 424 following a 20% decline in revenue. Of the 24 firms across all industries headquartered in Houston on this year's list, at least 18 are involved somewhere in the upstream, midstream, and downstream supply chain. Overall, Phillips 66 ranks first and ConocoPhillips third, with eight of the first 10 being oil- and gas-related firms.

Seen in recent decades as something of a model of economic growth, Houston in April recorded by far the smallest increase in US nonfarm employment among the 12 largest US cities at a mere 0.3%, according data from the US Bureau of Labor Statistics. More economically diverse Dallas had the highest growth at 3.9%.

Further, Houston's housing market has dived in recent months. In April, 66% of area homes were still on the market after 30 days vs. 50% last year, a report from real estate web site Trulia indicates. Industry hotbeds Ft. Worth, Oklahoma City, and Tulsa experienced similarly diminished activity. A separate report from Florida Atlantic University on the largest housing markets in the US projects a decline or flattening of Houston area housing prices.

The Houston area represented a 6.5-million-person sample size of what the US oil and gas industry's economic ecosystem looked like in 2015, complete with bankruptcies, layoffs, freshly empty office space, and empty bank accounts that prevented a marked increase in consumer spending. And the recovery, like that of the previously booming industry, will likely be slow and arduous.