Third-quarter earnings climb with higher oil prices, refining margins

Dec. 12, 2011
Oil and natural gas companies based in the US and Canada reported a collective surge in earnings during the third quarter compared with year-earlier results.

Marilyn Radler
Senior Editor-Economics

Laura Bell
Statistics Editor

Oil and natural gas companies based in the US and Canada reported a collective surge in earnings during the third quarter compared with year-earlier results.

A sample of US-based producers and refiners combined for a 35% increase in third-quarter earnings, and a sample of Canadian firms combined to post a 16% earnings increase from a year earlier.

Many operators reported improved results due to higher crude oil and gas realizations and generally stronger refining margins. But 13 of the US-based companies posted a net loss for this year's third quarter.

Oil prices were higher than those recorded during third-quarter 2010 on slightly greater worldwide demand along with geopolitical tensions and a decline in Libya's oil output.

The front-month futures price of West Texas Intermediate crude on the New York Mercantile Exchange averaged $89.54/bbl in the recent quarter compared with $76.21/bbl a year earlier.

While oil prices were stronger, gas prices were little changed from last year's third quarter. Front-month NYMEX gas futures in the third quarter averaged $4.055/MMbtu vs. $4.235/MMbtu a year earlier.

The US wellhead price of gas averaged $4.10/Mcf in this year's third quarter compared with $4.11/Mcf a year earlier, according to the US Energy Information Administration.

US firms

ExxonMobil Corp. earned $10.33 billion in the recent quarter with $125.33 billion in revenues while upstream production volumes fell 4% from a year earlier. Earnings for the first 9 months of 2011, which saw a 5% increase in production volumes, were $31.7 billion, up 49% over the first 9 months of 2010, the company reported.

Chevron Corp. reported that its earnings jumped 107% to $7.857 billion during the third quarter from a year earlier. Chevron's $6.2 billion in upstream earnings climbed by $2.6 billion on higher oil prices while its $2 billion in downstream earnings increased by $1.4 billion on gains from asset sales and improved margins.

Production increases from project ramp-ups in Canada, the US, and Brazil and new volumes stemming from the acquisition of Atlas Energy Inc. were more than offset by maintenance-related downtime, normal field declines, and a 39,000 b/d negative effect of higher prices on volumes produced under cost-recovery and variable-royalty contract provisions, Chevron said.

Anadarko Petroleum Corp. posted a $3 billion loss for the recent quarter, as the company recorded a $4 billion Deepwater Horizon settlement agreement with BP PLC that decreased net income by about $3.374 billion. Anadarko's third-quarter revenues totaled $3.2 billion on a 10% increase in liquids sales volumes from the 2010 quarter.

Refiners

Refining margins in the US were relatively strong in most regions during the recent quarter. Average cash margins moved up for Gulf Coast and Midwest refiners from the corresponding 2010 period, according to Muse, Stancil & Co. (MSC). Margins also were higher in Northwest Europe and Southeast Asia.

The average East Coast margin sank to average 15¢/bbl from $1.09/bbl a year earlier. But MSC figures show that US Midwest cash refining margins averaged $27.40/bbl in this year's third quarter, up from $10.33/bbl a year earlier.

Valero Energy Corp. recorded a surge in third-quarter earnings due to better margins. The San Antonio-based refiner's earnings were $1.2 billion, up from $303 million in third-quarter 2010.

Valero said earnings improved from a year earlier due to an increase of $5.11/bbl in its refining throughput margin combined with an increase of 389,000 b/d in refining throughput volumes.

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