Special Report: OGJ150 group's profits, oil production slide in 2008

Sept. 21, 2009
The OGJ150 group of US oil and gas producers posted a sharp decline in 2008 earnings despite an increase in revenues.

The OGJ150 group of US oil and gas producers posted a sharp decline in 2008 earnings despite an increase in revenues. High demand for equipment, employees, and services led to a surge in capital and exploration expenditures and operating costs.

Earnings and production through the first half of 2008 were propelled by high commodity prices and strong worldwide demand growth. But the second half of 2008 saw oil and gas demand and prices thrown into rapid descent.

Worldwide demand for oil products slipped to average 85.4 million b/d in the fourth quarter of 2008, down from the year-earlier average of 87.8 million b/d, according to the International Energy Agency.

The OGJ150 group, previously the OGJ200 (OGJ, Sept. 15, 2008, p. 22), now contains only 141 companies. A year ago, there were 147 firms in the compilation.

Totaling $72 billion, the combined 2008 earnings of the firms in the group fell 32% from a year earlier, although revenues climbed 23% over the period. The group's oil production volumes moved lower from 2007, but gas production volumes were up.

To qualify for the OGJ150, oil and gas producers must have their headquarters in the US, be publicly traded, and hold oil or gas reserves in the US.

The total yearend 2008 assets of the 141 firms in the group were $1.077 trillion, and the companies' combined stockholders' equity was $488 billion. These were both little changed from a year earlier.

During 2008, the OGJ150 group's capital and exploratory expenditures totaled $162.8 billion, up from $123.7 billion a year earlier, as their number of US net wells drilled jumped 8%.

Changes to the group

There are five companies that are new to the group this year, while some firms dropped out and some are now listed with new names.

The highest-ranking company that appears in the report for the first time is Houston-based Mariner Energy Inc., ranked at No. 35 with $3.39 billion in assets at the end of 2008.

Since last year's report, Equitable Supply has changed its name and is now listed as EQT Production, and DTE Oil & Gas Inc. changed its name to DTE Gas Resources. Energen Resources Corp. is now listed as its parent company, Energen Corp.

Some companies that were listed in the compilation a year ago are no longer listed due to a variety of reasons. Bayou City Exploration Inc. sold its US producing properties. And LL&E Royalty Trust liquidated, so there are now only four royalty trusts in the group vs. five a year ago.

Galaxy Energy Corp. and Knight Energy Corp. filed bankruptcy and are not listed in the group this year. PRB Energy Inc. is not listed this year, as it is emerging from bankruptcy this year and has changed its name to Black Raven Energy Inc. And Infinity Energy Resources is not in the group this year because it had not filed its yearend report by presstime.

There are five limited partnerships in the OGJ150. The largest of these, with $2.34 billion in assets, is No. 42 Kinder Morgan CO2 Co. LP. And the smallest of the limited partnerships is No. 134 Apache Offshore Investment Partnership with a total of $6.68 million in yearend 2008 assets.

Annual results

The companies in the OGJ150 logged increases in gas production volumes and yearend 2008 gas reserves, but oil production volumes declined from a year earlier, as did the group's combined oil reserves totals.

The OGJ150 details each company's liquids and gas production and reserves worldwide and breaks out such results for the US. The group's worldwide production of crude, condensate, and natural gas liquids declined nearly 10% from 2007, but in the US, the firms' collective liquids production dropped 17.5% last year.

During 2008, the group's worldwide capital spending soared 31.6%, as their US net wells drilled climbed to 25,113 from 23,279 a year earlier.

The Baker Hughes Inc. rotary rig count shows that the number of rigs drilling for oil and gas in the US during 2008 averaged more than during 2007, but by the end of 2008, the number was falling due to the drop in commodity prices amid the global economic slowdown.

Worldwide gas production volumes by the OGJ150 companies increased almost 8% last year, and their gas output in the US climbed 6%.

The group's reserves moved in tandem with their production volumes. Worldwide oil reserves held by the group were down 4% from the end of 2007, but the group's combined worldwide gas reserves increased 8%.

Financial performance

The two companies at the top of the OGJ150, ExxonMobil Corp. and Chevron Corp., recorded improved earnings from 2007, but the group's combined net income declined sharply last year.

There were 65 companies in the group with a net loss for 2008, led by No. 3 ConocoPhillips. The Houston-based company took a $25.4 billion impairment on all its E&P segment goodwill and a $7.4 billion impairment on the book value of its OAO Lukoil investment. With these charges ConocoPhillips's net loss for the year was $17 billion.

Total revenue for the group of 141 companies was $1.31 trillion, up from $1.06 trillion a year earlier due to stronger average oil and gas prices.

For 2008, the average US wellhead price of crude oil was $94.04/bbl, up from $66.52/bbl a year earlier. The US Energy Information Administration estimates that the US wellhead price of gas last year climbed 27% on the previous year to average $8.07/Mcf.

Lower crack spreads and refining volumes in the US hit the downstream earnings of the integrated firms. US refinery utilization averaged 85.3% last year vs. 88.5% in 2007, according to EIA, whose figures show that capacity utilization has declined each year since it averaged 93% in 2004.

No. 5-ranked Marathon Oil Corp. reported that its refining, marketing, and transportation segment income for 2008 was down 43% from a year earlier to $1.179 billion on lower refining and wholesale marketing gross margins, and its manufacturing expenses were relatively higher in 2008 due primarily to higher energy costs and maintenance related activities.

The US Gulf Coast cash refining margin last year averaged $9/bbl, down from the 2007 average of $12.60/bbl, according to Muse, Stancil & Co. Meanwhile, the composite refiners' acquisition cost of crude in the US averaged $94.73/bbl last year, up from $67.94/bbl a year earlier.

Fastest growers

XTO Energy Inc. is the fastest growing company of the OGJ150. With headquarters in Fort Worth, XTO Energy more than doubled its stockholders' equity during 2008 to $17.347 billion, while the company's earnings jumped 13% to $1.9 billion.

The list of the 20 fast growing companies ranks the firms by their growth in stockholders' equity. To qualify for this list, a company in the OGJ150 must have recorded positive net income for both 2008 and 2007 and shown an increase in net income last year. Excluded from this list of fast growers are limited partnerships, newly public companies, and subsidiaries.

GeoResources Inc. is the second-fastest growing company in the group, having grown its stockholders' equity 107% while boosting its 2008 earnings to $13.5 million from $3 million a year earlier.

The rest of the top 5 fastest growing firms in the group are Clayton Williams Energy Inc., Arena Resources Inc., and Berry Petroleum Co.

Arena Resources was also the fourth-fastest grower in last year's edition of this special report. Range Resources Corp., eleventh among the fast growers, and Spindletop Oil & Gas Co., seventeenth among the fast growers, also appeared on this list a year ago.

Top 20 firms

The highest-ranking firms in the OGJ150 as ranked by yearend 2008 assets fared a bit better than the entire group as far as earnings and output of oil and gas. These 20 companies that lead the list combined for a 25% decline in earnings last year, while their revenues were up almost 23%.

With growth of 28%, the total capital spending for this top 20 group was up less than that for the entire group. But their combined capital spending during 2008 was $127.3 billion, accounting for 78% of the outlays of all 141 companies in the compilation.

The number of US net wells drilled last year by the top 20 firms was 14,805, up nearly 12% from a year earlier. That number of wells accounts for 59% of the US net wells drilled by the entire OGJ150 group.

Also, with net income totaling $76.32 billion, the 2008 earnings of the top 20 firms exceeded the earnings of the entire group by $4 billion.

Only one company in the top 20 was not among these leaders last year. Questar Corp. is now ranked No. 19, up from No. 22. Based in Salt Lake City, Questar had yearend 2008 assets of $8.63 billion and $3.4 billion in stockholders' equity.

The market capitalization of the top 20 firms at the end of 2008 dropped sharply from a year earlier. As of Dec. 31, 2008, these companies' combined value of all shares outstanding totaled $890 billion. This compares to $1.26 trillion in market cap at yearend 2007 tallied by the top 20 companies in last year's compilation.

Earnings leaders

The OGJ150 also ranks the companies by their earnings. And the list of the top 20 earners during 2008 varies somewhat from the top 20 firms ranked by assets.

ExxonMobil leads both lists as ranked by assets and by 2008 earnings, posting net income of $45.22 billion last year. Chevron is second among the earnings leaders with $23.9 billion in 2008 net income, followed by Occidental Petroleum Corp., Marathon, and Anadarko Petroleum Corp.

The twelfth-leading earner in the OGJ150 is Kinder Morgan CO2, which ranks at No. 42 in terms of assets. This Houston-based company's earnings last year were $759.9 million.

Top 20 in capex, drilling

ExxonMobil, Chevron, and ConocoPhillips were the top three companies in capital and exploratory spending last year, followed by Devon Energy Corp., Chesapeake Energy Corp., and Marathon.

Ranked at No. 22 by assets, Petrohawk Energy Corp. ranks at No. 13 in 2008 capital spending with outlays totaling $3.12 billion.

The top 20 capital spending leaders' collective outlays during the year totaled $132.17 billion. This compares with the previous top 20 group's 2007 capital spending of $103 billion.

With a count of 1,733 wells, Chesapeake Energy leads the OGJ150 group in the number of net wells drilled in the US during 2008. The company also led the group a year ago for its number of wells drilled in the US during 2007.

The large independent operators typically lead the list of the top 20 as ranked by their number of US net wells drilled. The second company on the list this year is Anadarko, with 1,590.8 wells, followed by EOG Resources, XTO Energy, and Devon Energy.

Production, reserves leaders

ExxonMobil leads the OGJ150 companies in worldwide liquids production and reserves, as well as in worldwide gas production and reserves.

ConocoPhillips leads the group in US liquids production, US liquids reserves, and US gas production but is ranked fourth in terms of US gas reserves. Topping the list of US gas reserves holders is XTO Energy.

In 2008, ConocoPhillips's production of crude, condensate, and NGL in the US totaled 157 million bbl. Chevron, which led the group a year ago with 2007 US liquids production of 168 million bbl, is now second, with 154 million bbl of liquids production.

Following ExxonMobil in worldwide liquids production are Chevron, ConocoPhillips, Occidental Petroleum, Hess Corp., and Apache Corp.

Similarly, the worldwide liquids reserves holders in the OGJ150 group that follow ExxonMobil are Chevron, ConocoPhillips, Occidental, Apache, and Hess.

Following ConocoPhillips in US gas production are Chesapeake, Anadarko, Devon, and XTO Energy. Sixth in US gas production for 2008 among the OGJ150 firms is ExxonMobil, followed by Chevron, EOG Resources, and Williams Cos. Inc.

Click here to download the pdf of the OGJ150: Group Profits

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