OGJ200 Scores Solid Financial, Operating Gains

Robert J. Beck
Associate Managing Editor-Economics
Laura Bell
Statistics Editor

Some key changes from 1996 OGJ200 [106,586 bytes]
Top companies in return on...* [58,178 bytes]
Fastest growing companies [181,857 bytes]
The top 20 in net income and stockholders' equity [162,481 bytes]
The top 20 in spending and U.S. net wells drilled [157,649 bytes]
Top 20 in total revenue [70,729 bytes]
The top 20 in liquids reserves [147,502 bytes]
The top 20 in liquids reserves (continued) [149,530 bytes]
The top 20 in gas reserves [157,396 bytes]

The top 20 in gas production [145,111 bytes]

For companies on the OGJ200 list of publicly traded oil and gas producing companies in the U.S., 1996 was a banner year. Almost all indicators of financial and operating performance increased from comparable measures of 1995.

Net income for the OGJ200 group shot up 82% in 1996 to a total of $33.9 billion. In last year's report, OGJ200 profits for 1995 totaled $18.6 billion, up 15.2% from 1994. The lowest OGJ group profits total was $10.4 billion in 1992, when the group comprised 300 companies.

As always, data for this year's list reflect the prior year's operations.

Total OGJ200 revenues were up 14% in 1996 at $586.1 billion. Revenues for last year's OGJ200, covering 1995, totaled $514.2 billion, up 6% from the year earlier.

Assets for the OGJ200 group totaled $512.4 billion for 1996, up 6.6% from 1995. This is the highest assets total for the OGJ group since 1985.

Total stockholders' equity of the companies represented by this year's OGJ200 increased 10.1% to $192 billion in 1996.

Comparisons between totals for one year's OGJ200 with those for another year must take into account the company changes that occur. But for any given year the OGJ list represents a significant part of the U.S. oil and gas producing industry and therefore does accurately reflect industry activity and financial performance.

The OGJ200 ranks companies by assets without regard to whether they use the full cost or successful efforts method of accounting.

Capital and exploration spending for the OGJ200 group totaled $61.5 billion in 1996, up 14.3% from 1995. This was the highest spending level for the OGJ group since 1985.

The increase in capital sending gave a boost to exploration and drilling activity.

The number of net wells drilled by the OGJ200 increased to 10,834 from 9,202 in 1995. This was the highest number of wells drilled by the OGJ group since 1990.

The industry

The OGJ200 companies, like the worldwide industry to which they belong, benefited from demand gains for oil and natural gas in 1996. Prices for both commodities were higher than they were the year before.

Petroleum product consumption rose in most regions of the world. The former Soviet Union (FSU) continued to be a major exception; consumption there slipped again last year.

According to estimates from the International Energy Agency (IEA), oil consumption in the Organisation for Economic Cooperation and Development (OECD) countries increased 2% to average 41.2 million b/d for 1996 on the strength of economic growth and strong winter demand. Demand in OECD Europe increased 2.2% to 14.2 million b/d. In North America it was up 2.5% at 20.3 million b/d.

In the non-OECD countries excluding the FSU, product demand moved up 5.6% last year to average 26.5 million b/d. The sharpest increase was in non-OECD Asia, where demand rose 7.5% to 8.6 million b/d. That followed an 8.1% increase the year before. Demand in Latin America increased 4.9% to average 6.4 million b/d.

Demand in the FSU fell 10% in 1996 to an average 4.3 million b/d following a decline of only 2% in 1995 to 4.8 million b/d.

In the U.S., petroleum product consumption moved up 509,000 b/d to average 18.234 million b/d in 1996. This was the fourth highest level on record, surpassed only by demand in 1977-79. Demand was up for all of the major product groups except residual fuel oil. The increase in demand included the lighter and often more-profitable products.

U.S. consumption of motor gasoline increased 60,000 b/d to a record high 7.849 million b/d. Distillate demand moved up 161,000 b/d in 1996 to average 3.368 million b/d. Jet fuel demand moved up 63,000 b/d to average 1.577 million b/d.

Worldwide natural gas consumption increased 4.7% in 1996 to 77.4 tcf. There were increases in all regions, including the FSU, where demand had been falling since 1991. FSU gas demand increased 0.7% last year to 18.6 tcf. Natural gas consumption in Europe moved up 10.7% last year to 14.8 tcf. Demand in Central and South America moved up 10% to 3 tcf, and demand in Asia and Australasia increased 7.5% to 8.3 tcf. The largest regional demand was in North America, where gas consumption increased 2.3% in 1996 to 26 tcf.

In the U.S., natural gas consumption increased 1.5% to 21.9 tcf, the second highest level on record.

Group revenues and earnings for the OGJ200 were also bolstered by higher oil prices worldwide and higher product prices in the U.S. Higher U.S. natural gas prices also contributed.

The world export price of crude oil increased 19.5% in 1996 from the level in 1995, averaging $20.04/bbl. The futures price of light sweet crude oil on the New York Mercantile Exchange (Nymex) increased 19.8% to average $22.01/bbl in 1996. And the average U.S. wellhead price for crude oil moved up 26.3% to $18.46/bbl. The average U.S. refiner acquisition cost of both domestic and imported crude oil was up 19.9% in 1996 to $20.66/bbl.

In the U.S., the refiner price for motor gasoline increased 13.9% in 1995 to average 71.3¢/gal.

The refiner price for aviation gasoline was up 8.2% at $1.055/gal, for No. 2 diesel fuel up 22.5% to 65.9¢/gal. The price of resid sold from refiners to end users increased 15.8% to average 45.4¢/gal.

Strong demand enabled refiners to pass through the increased crude oil costs to consumers, and refining margins improved in 1996. According to Ernest Young Wright Killen, average U.S. Gulf Coast cash operating margins increased to 71¢/bbl from 33¢/bbl in 1995. The average margin was 88¢/bbl in 1994 and $1.39/bbl in 1993. Higher product prices offset the increase in feedstock costs, and increased volumes tended to lower unit operating costs.

The Nymex futures price of natural gas jumped 49.1% to an average of $2.52/MMBTU in 1996. The price averaged $1.69/MMBTU in 1995. The average U.S. wellhead price of natural gas increased 45.2% to average $2.25/Mcf in 1996 from $1.55/Mcf the year before. This slowed the rate of increase in demand, but consumption of natural gas in the U.S. was still up 1.5% in 1996.

In 1996, drilling activity increased around the world. In recent years drilling activity in the U.S. has increasingly been focused on natural gas. And the higher natural gas prices in 1996 helped boost activity. The number of active rotary rigs averaged 779 in 1996, up from 723 in 1995.

The rig count in Canada rose to 270 in 1996 from 229 in 1995, also largely on the strength of higher gas prices.

Drilling outside the U.S. and Canada benefited from the rise in crude oil prices. The average international rig count excluding the U.S. and Canada increased to 793 in 1996 from 759 in 1995.

Financial performance

For 1996, 163 of the OGJ200 companies reported profits; a year earlier, 121 companies made money.

The number of companies with net incomes exceeding $100 million increased to 34 in 1996. This was up from 18 companies for 1995, 23 companies in 1994, 24 in 1993, 19 in 1992, 18 in 1991, and 30 in 1990.

A total of 37 OGJ200 companies posted net losses for 1996. This compares with 79 companies in 1995, 116 in 1994, 108 in 1993, and 125 in 1992. None of the net losses exceeded $100 million in 1996, compared with eight in 1995, four in 1994 and 1993, and seven in 1992.

The increase in net income improved indicators of financial performance in 1996. Return on assets for the OGJ200 group increased to 6.6%, the best year since the OGJ list was started in 1983, from 3.9% in 1995 and 3.3% in 1994. Return on assets was 3.9% for OGJ300 companies in 1993, 2.2% in 1992, 3.4% in 1991, and 4.7% in 1990. The low point for return on assets came in 1986 at 1%.

Return on revenue for the group moved up to 5.8% from 3.6% in 1995, 3.3% in 1994, 3.9% in 1993, 2.1% in 1992, 3.3% in 1991, and 4.3% in 1990. The previous high point for return on revenue was 5.1% in 1988. The lowest return on revenue was 1.2% in 1986.

Return on stockholders' equity was also at an all time group high in 1996, increasing to 17.6% from 10.7% in 1995 and 9.4% in 1994. Return on stockholders' equity was 10.9% in 1993, 6.4% in 1992, 9.8% in 1991, and 13.6% in 1990. The highest previous level for this measure of performance was 13.8% in 1982, and the low was 3% in 1986.

The OGJ200's 1996 capital and exploration spending was the highest group total since the $66 billion of 1985, when the list contained 400 companies. That was prior to the price crash in 1986, which sent the industry into recession. The record high capital outlays for the OGJ list was $66.5 billion in 1983, for 400 companies.

Group operations

The majority of the indicators of OGJ200 group operations moved up in 1996. The only exceptions were U.S. liquids production and U.S. natural gas reserves.

Group worldwide natural gas production moved up 4.3% to 17 tcf, the highest output since 1982. Total worldwide natural gas production was up 4.9% in 1996 at 78.72 tcf.

U.S. natural gas production for the OGJ200 group moved up 4.7% to 11.6 tcf. Total U.S. marketed output was up 2.3% at 19.9 tcf for 1996.

OGJ200 worldwide liquids production increased 0.7% in 1996 to 3.282 billion bbl. The increase came in spite of a drop in the group's U.S. liquids production of 0.4% to 1.82 billion bbl. The group's non-U.S. output was up 2.2% at 1.462 billion bbl.

Worldwide liquids reserves moved up 2% in 1996 to 34.6 billion bbl. Group worldwide liquids reserves moved up for the third consecutive year after falling for 5 years.

Non-U.S. reserves were up 3.1% in 1996 at 15 billion bbl. Group U.S. liquids reserves moved up 1.1% to 19.6 billion bbl. The group's U.S. liquids reserves had fallen from 1987 through 1994.

Worldwide natural gas reserves for the OGJ200 group rose for the fourth consecutive year in 1996 to 189.6 tcf, a 1.1% gain from 1995. Group natural gas reserves in the U.S. fell 0.2% to 110.5 tcf. Non-U.S. natural gas reserves for the OGJ200 increased 3% to 79.1 tcf.

Group changes

This year's list contains eight companies that didn't appear before. The previous year's OGJ200 included four newcomers.

The 1997 OGJ200 contains four publicly traded limited partnerships (LPs), the same number as the year before. The largest LP is Hallwood Energy Partners, with assets of $122.8 million. The smallest LP on the list, Apache Offshore Investment Partners, had assets of $12.3 million.

The list also includes eight royalty trusts, the same as the year earlier, and 24 companies that are subsidiaries of non-U.S. energy companies or of companies operating mainly in another industry.

The last company on this year's OGJ200 list had 1996 assets of $2.889 million, down from $3.343 million on last year's list.

The asset value for the 100th ranked company increased to $129.4 million on this year's list from $116.9 million last year.

Top 20 companies

In 1996 there was one new company in the top 20 companies ranked by assets. Burlington Resources moved into the No. 20 spot from No. 21 the year before, swapping places with Pennzoil.

There was also some reshuffling of asset position within the top 20. BP (USA) slipped to No. 13 from No. 9 the year before. Enron moved from No. 10 to 9, Conoco from No. 11 to 10, Phillips from No. 12 to 11, and Coastal from No. 13 to 12.

The top 20 companies on this year's list had total assets of $426 billion at the end of the preceding year, up from $404.5 billion for the top 20 companies last year.

Assets of the top 20 companies represented 83.1% of total group assets in 1996, compared with 84.1% for last year's top 20.

The top 20 reported revenues of $536.7 billion in 1996, up from $475.4 billion a year earlier. This was 91.6% of total revenues for the OGJ200, down from 92.4% the previous year.

The collective net income of the top 20 was $29.9 billion in 1996, compared with $18.2 billion in 1995 and $16 billion in 1994.

Top 20 net income for 1996 represented 88.1% of the total for this year's OGJ200. It was 97.8% of the income total for last year's group.

Two of the companies in the top 20, Conoco and BP (USA), do not report stockholders' equity because they are subsidiaries. Total stockholders' equity for the remaining 18 companies of the top 20 totaled $160.6 billion in 1996, up from $145.5 billion in 1995. This was 83.6% of the OGJ200 total stockholders' equity.

Capital and exploration expenditures in 1996 by the top 20 group totaled $46.3 billion, up from $41.1 billion in 1995, $37.8 billion in 1994, and $38.3 billion in 1993. The 1996 figure is 75.1% of the OGJ200 total.

The top 20 companies drilled 4,882 net wells in 1996, up from 4,147 in 1995 and 4,584 in 1994. This group drilled only 3,788 net wells in 1993 and 3,599 in 1992. The 1996 total for the top 20 companies amounted to 44.9% of total wells for this year's OGJ200.

The top 20 companies accounted for 85.8% of worldwide liquids production and 80.4% of the U.S. liquids production. They had 73.9% of worldwide natural gas production and 63.5% of U.S. natural gas production.

The top 20 hold 85.5% of the OGJ200 group's worldwide liquids reserves and 81.2% of U.S. liquids reserves. They also have 78.4% of the group's worldwide natural gas reserves and 65.5% of U.S. gas reserves.

OGJ200 shares

The OGJ200 group's total revenues in 1996 amounted to 7.7% of U.S. gross domestic product (GDP). This was up from 7.1% in 1995. OGJ group revenues were as much as 18.4% of GDP in 1983.

The OGJ200 companies also posted substantial shares of total U.S. oil and gas production and reserves in 1996. The group's liquids production was 60.2% of the U.S. total, and natural gas production was 58.3% of the U.S. total. The group has 65.8% of total U.S. liquids reserves and 66.9% of the U.S. gas reserves.

The OGJ200 group holds 3.3% of worldwide liquids reserves and 3.8% of natural gas reserves. In 1996, the group accounted for 12.9% of worldwide liquids production and 21.6% of worldwide natural gas production.

Fast-growing companies

Growth rankings for the OGJ200 are based on stockholders' equity. To be included on growth lists, companies must have reported positive net income for 1996 and 1995 and an increase in net income in 1996. Subsidiary companies, newly public companies, and limited partnerships are not included.

Most of the fastest growing companies posted large increases in net income in 1996. Nine of the 20 companies in the fastest growing list had increases in net income of 100% or more. All of the companies had earnings gains of at least 40%.

The long term debt positions of the companies on the list were mixed. Ten of the companies increased long term debt, nine decreased long term debt, and one was unchanged.

Flores & Rucks led the growth list this year. Its stockholders' equity moved up 426.4%, and net income increased 111.6% to $21 million in 1996. The company was No. 69 in total assets.

Five of the companies were in the top 20 list for growth last year: Chesapeake Energy, Saba Petroleum, Stone Energy, Global Marine, and Royale Energy.