OGJ300 OGJ SPECIAL OGJ300 Population Shrinks, But Assets Total Grows

Robert J. Beck
Associate Managing Editor -- Economics

Laura Bell
Statistics Editor

Publicly traded oil and gas companies in the U.S. are declining in population but growing in financial terms. The Oil & Gas Journal 300, the annual list of publicly traded companies with oil production in the U.S., includes only 281 companies this year. As of the data compilation deadline, only that number of companies had filed annual financial results with the U.S. Securities and Exchange Commission.

The shortfall is one more sign of consolidation of the producing industry. The trend began in the mid-1980s and continues as companies merge, liquidate, and divest reserves.

Yet companies on this shrinking list own a body of assets that grew in 1994. The 281 companies reported yearend assets totaling $483.4 billion. Thats 2.5% greater than the 1993 total for the 300 companies on last years list (OGJ, Sept. 5, 1994, p. 49).

Total stockholders equity for the OGJ300 increased 2.2% to $171.3 billion.

Comparisons between totals for one years OGJ300 with those for another years list must take into account the company changes that occur from one year to another. As this years company count shows, those changes can be significant. Until 1991, the OGJ list covered 400 publicly traded U.S. oil and gas producers.

For any particular year, however, the OGJ300/400 does represent a significant part of the U.S. oil and gas industry and therefore accurately reflects trends in industry activity and financial performance.

The OGJ300 ranks companies by assets without regard to whether the companies use the successful efforts or full cost accounting method. Normally, assets for a given set of properties are higher under full cost than under successful efforts accounting.

Key trends

Total revenues also turned up in 1994 after 3 down years-by 2.1% from the preceding total to $485.2 billion. Increased volumes associated with rising demand offset declines in average oil and gas prices.

But profits slumped. Total 1994 earnings by this years OGJ300 list fell 11.9% to $16.1 billion from the previous year. The 1993 total for last years list was up 76% from its predecessor.

Much of the earnings decline for the current OGJ300 results from restructuring charges and accounting changes at large, integrated companies, which dominate list totals. The top 20 companies, for example, account for 99% of total OGJ300 profits.

Capital and exploration spending by this years OGJ300 in 1994 slipped by 0.9% from the previous year to $49.9 billion.

Drilling increased, nevertheless. U.S. net wells drilled in 1994 by companies in this years OGJ300 totaled 9,808, up 13.3% from the 1993 total by companies on last years list.

The OGJ300 in 1992 and 1993 reflected declines in both capital and exploration spending and drilling.

The drilling increase by this years OGJ300 came despite generally lower earnings from upstream operations, as increased production volumes by many companies failed to offset slumping oil and gas prices.

Earnings from downstream activities were mixed in 1994. Increased sales volumes improved earnings for some companies. But others suffered from reduced margins and increased restructuring and environmental costs. Most companies with chemical operations scored earnings gains from this sector in 1994 thanks to economic growth in major consuming areas.

Top Companies in Return on....* chart (101776 bytes)

The year

Results covered in the current OGJ300 came in a year during which U.S. petroleum product consumption moved up 2.8% to average 17.718 million b/d. The U.S. refiner acquisition cost of crude oil in 1994 fell 5% to average $15.59/bblindicative of price movements worldwide.

The average world price of non-OPEC export crude oil averaged $15.56/bbl in 1994, compared with $16.44/bbl the year before.

The U.S. average wellhead price of crude oil fell for the fourth consecutive year in 1994by 7.4% to $13.19/bbl.

U.S. product prices also slipped. The average U.S. refiner price of finished motor gasoline for resale dropped 4.3% to 59.9/gal. The refiner resale price of No. 2 fuel oil slipped 7% to 50.6/gal.

Petroleum product demand was up in most industrial and developing areas outside the U.S. except the former Soviet Union in 1994. Oil demand in the Organisation for Economic Cooperation and Development (OECD) countries moved up 2.3% to average 40 million b/d in 1994. The increase occurred primarily in North America and the Pacific OECD countries.

In non-OECD countries excluding the former Soviet Union, product demand moved up 4.4% in 1994 to average 23.7 million b/d. The sharpest increase was in non-OECD Asia, where demand moved up 7.2% to 7.4 million b/d.

Refining margins in Europe and the developing countries fell as product values fell more than did average crude oil prices. Average world export crude prices fell 3.4% in 1994 to $15.28/bbl. According to the International Energy Agency (IEA), average annual product worth based on Rotterdam spot prices slipped 8.9% to $28.46/bbl.

The IEA calculation of average product value based on the Singapore spot market showed a decline of 5.1% to $16.29/bbl. According to the IEA, the average cracking margin in Northwest Europe for Brent crude fell 22.9% to $1.65/bbl. The hydroskimming margin in Singapore for Dubai crude fell 51.4% to 69/bbl.

In the U.S., the average wellhead price of natural gas fell 9.9% to average $1.83/Mcf in 1994. But gas consumption increased 2.1% to 20.726 tcf, and marketed production for all of industry moved up 3.3% to 19.766 tcf.

Fastest Growing Companies* chart (56852 bytes)

OGJ300 performance

Last year 165 of the 281 OGJ300 companies posted profits. Of last years 300 companies, 192 reported profits for 1993.

With the drop in net income, profitability indicators also fell. Return on assets for this years group fell to 3.3% from 3.9% for last years list, return on revenue also to 3.3% from 3.9%, and return on stockholders equity to 9.4% from 10.9%.

Total return on assets was 2.2% (for the 1993 OGJ300) in 1992, 3.4% in 1991, and 4.7% in 1990. Return on assets slumped to only 1% in 1996. The best year was 1982, with 5.7%.

Group return on revenue was 2.1% in 1992, 3.3% in 1991, and 4.3% in 1990. The highest return on revenue posted for the OGJ group was 5.1% in 1988. The lowest return on revenue was 1.2% in 1986.

Total return on OGJ300/400 stockholders equity was 6.4% in 1992, 9.8% in 1991, and 13.6% in 1990. The highest level for this measure of performance was 13.8% in 1982, the low 3% in 1986.

Group operations

Most indicators of OGJ300 operations moved up in 1994. In addition to U.S. drilling activity, the list scored gains in U.S. and worldwide natural gas production and reserves and worldwide liquids production and reserves. The only operating indicators that fell for this years list were U.S. liquids productions and reserves.

Group worldwide gas production jumped 9.2% to 15.95 tcf in 1994, highest since the OGJ400/300 began. U.S. gas output by the OGJ300 moved up 4.2% to 10.9 tcf.

OGJ300 worldwide liquids production increased 3.9% in 1994 to 3.25 billion bbl. U.S. liquids production by the group was off 1.4% at 1.854 billion bbl. The groups U.S. and worldwide liquids production had been falling since 1985.

In 1994 OGJ300 worldwide liquids reserves increased by 0.9% to 23.4 billion bbl, gas reserves by 2.9% to 182 tcf.

U.S. liquids reserves for the group fell 1.4% to 19.4 billion bbl at yearend 1994, continuing a trend that began in 1987.

Group natural gas reserves in the U.S. increased 0.5% to 106.3 tcf in 1994 following a 0.7% increase the year before.

OGJ300 changes

This years OGJ300 contains 17 companies that have not appeared on it before. Last year there were 31 new companies on the list and 33 the year before that.

The list includes publicly traded companies with U.S. reserves and production for which financial reports were available. Four companies on this years list are publicly traded limited partnerships (LPs). The year before there were seven LPs, compared with five on the 1993 list, six on the 1992 list, and 30 on the 1991 list. The 1990 list of 400 companies included 95 LPs.

The largest LP this year is Hallwood Energy Partners, with assets of $136.3 million. The smallest LP on the list, Enex Program I Partners, had assets of $5.3 million.

There are nine royalty trusts listed this year, the same as the year before. There are 19 companies that are subsidiaries of non-U.S. energy companies or of companies operating mainly in another industry.

The last company on this years OGJ300 list had 1994 assets of $100,000, up from $84,000 last year and only $26,000 the year before. This low asset number has fluctuated substantially from the low of $26,000 to a high of $2.366 million in 1983.

In 1994, 23 companies had net incomes exceeding $100 million, compared with 24 in 1993 and 19 in 1992. Companies posting income at that level totaled 18 in 1991, 30 in 1990, 28 in 1989 and 1988, and 21 in 1987.

A total of 116 companies posted net losses in 1994, compared with 108 in 1993 and 125 in 1992. Four had losses exceeding $100 million in 1994, the same as in 1993 and compared with seven in 1992 and four in 1991.

Top 20 in Total Revenue chart (23347 bytes)The Top 20 ini Net Income and Stockholders' Equity chart (46665 bytes)The Top 20 in Spending and U.S. Net Wells Drilled chart (44712 bytes)The Top 20 in Liquids Reserves chart (43428 bytes)The Top 20 in Liquids Production chart (42701 bytes)The Top 20 in Gas Reserves chart (42708 bytes)The Top 20 in Gas Production chart (41664 bytes)

Top 20 companies

This years list includes one newcomer to the top 20 positions in the assets ranking. Meridian Oil, No. 21 last year, switched places with Pennzoil. Also in the top 20, No. 10 Enron and No. 11 Conoco swapped positions from last year.

Assets of the top 20 companies increased in 1994, but the top 20s share of the group total declined slightly.

This years top 20 had total assets of $400.8 billion in 1994, up from $393.4 billion for last years list. Their assets represented 82.9% of the group total this year vs. 83.4% last year.

The top 20 received revenues of $436.9 billion in 1994, up from $431.8 billion in 1993 but down from $452 billion in 1992 and $459.9 billion in 1991. This was 90% of total revenues for this years OGJ300.

Total net income of the top 20 was $15.97 billion in 1994 vs. $16.4 billion in 1993, $9.4 billion in 1992, and $15.8 billion in 1991.

This years 99% share of total group 1994 income by the top 20 is unusually high. The 20 biggest companies accounted for 89.4% of total net income in 1993, 90.3% in 1992, and 95.2% in 1991.

Two of the companies in the top 20, Conoco and BP (USA), do not report stockholders equity. Total stockholders equity for the remaining 18 was $144.3 billion in 1994, 84.2% of the OGJ300 total.

Capital and exploration expenditures by the top 20 group in 1994 amounted to $37.8 billion, down from $38.3 billion in 1993, $41.2 billion in 1992, and $41.7 billion in 1991. This was 75.8% of the OGJ300 capital spending in 1994.

The top 20 companies drilled 4,584 net wells in 1994, up from 3,788 in 1993 and 3,599 in 1992 but down from 5,370 in 1991. In 1994 this was 46.7% of wells drilled by the OGJ300 group of companies.

The top 20 companies accounted for 86.6% of the groups worldwide liquids production and 82.3% of the U.S. liquids production. They had 75.1% of the groups worldwide natural gas production and 65.7% of the U.S. natural gas production.

The 20 biggest companies held 87.6% of the OGJ300 groups worldwide liquids reserves and 85% of U.S. liquids reserves in 1994. They also had 80% of the groups worldwide natural gas reserves and 68.7% of the U.S. natural gas reserves.

OGJ300 shares

The OGJ300 groups total revenue of $485.2 billion in 1994 was equal to 7.2% of U.S. gross domestic product (GDP). This was down from 7.5% in 1993 and 8.2% in 1992. This ratio peaked at 18.4% of GDP in 1983.

This years group of companies accounted for 60.5% of U.S. liquids production in 1994, 55.2% of U.S. gas production, 64.6% of total U.S. liquids reserves, and 65.6% of U.S. gas reservers.

The OGJ300 group held 3.3% of worldwide liquids reserves and 3.7% of natural gas reserves. In 1994 group output was 13.4% of worldwide liquids production and 21.7% of worldwide natural gas production.

Fast-growing companies

The ranking for the OGJ300 list of the fastest growing companies is based on growth in stockholders equity. Other qualifications are that companies are required to have positive net income for 1994 and 1993 and have an increase in net income in 1994. Subsidiary companies, newly public companies, and LPs are not included.

Most of the fastest growing companies posted substantial increases in net income in 1994. Seven of the 20 companies in the growth list had increases in net income of 100% or more. And all but two of the companies posted earnings gains of more than 20%.

The long term debt positions of companies on the list were mixed. Eleven of the companies increased long term debt, six decreased long term debt, and three were unchanged with no long term debt.

Great Northern Gas led the list this year. Its stockholders equity moved up 240.8%, and net income increased 1,298.3% to $2.475 million in 1994. Great Northern ranked 216 in assets.

Five of the companies were on the fast-growth list last year. For Lomak Petroleum, it was the fifth such appearance in a row. Summit Petroleum is on the list for the third year in a row. Pogo Producing, Patterson Energy, and Coda Energy were the other repeaters from last year.

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