Conglin Xu
Senior Editor-Economics
Laura Bell
Statistics Editor
A sample of 58 oil and gas producers and refiners based in the US recorded a combined 38% jump in profits for this year's third quarter compared with year-earlier results. This contrasts with a 2% decrease in their total revenues from a year ago. The group's collective earnings during this year's first 9 months rose 4% from the same period of 2013 with a 1.4% increase in revenues.
Crude oil prices fell sharply in the third quarter, reflecting weak demand and ample supply. West Texas Intermediate crude finished the quarter at $93/bbl vs. $105/bbl at the end of the second quarter and $106/bbl at the end of third-quarter 2013. Brent crude fell 18% from its July peak to close at $94.67/bbl as of Sept. 30.
Upstream earnings had been negatively impacted by declining oil prices. However, despite lower prices, many producers drilling in the US were able to increase their profitability through increasing production and controlling costs. Gains from asset sales and hedging instruments also contributed to firms' higher financial performance.
Downstream results for this year's third quarter were much stronger compared with third-quarter 2013, due to mostly improved refining margins and operations. The quarterly average composite cost of crude oil for US refiners was $96.30/bbl, down 8.4% from a year ago, according to the US Energy Information Administration. Cash operating margins in all refining centers increased from a year earlier, according to Muse Stancil & Co.
Front-month gas on the New York Mercantile Exchange averaged $3.95/MMbtu in this year's third quarter vs. $3.56/MMbtu a year earlier. For this year's second quarter, front-month NYMEX gas futures averaged $4.58/MMbtu.
Meanwhile, a group of 12 oil and gas companies based in Canada reported a combined increase of 38% in earnings for the third quarter vs. a year earlier, and reported a 3.8% climb in revenues.
US producers
ExxonMobil Corp. reported $8.3 billion in earnings in this year's third quarter, up 3.4% from third-quarter 2013. ExxonMobil's revenues, meanwhile, reached $107.5 billion for the quarter, down from $112.4 billion a year ago. Capital and exploration expenditures totaled $9.8 billion for the quarter, down 7% from third-quarter 2013.
The supermajor's upstream earnings for the third quarter were $6.4 billion, down $297 million from third-quarter 2013. The decrease was primarily caused by lower liquids realizations, partially offset by favorable volume mix effects and other items. However, earnings from US upstream operations were nearly $1.3 billion, $207 million higher than last year's third quarter.
On an oil-equivalent basis, ExxonMobil's production decreased 4.7% from a year ago, largely due to the expiry of the Abu Dhabi onshore concession. Third-quarter natural gas production was 10.6 bcfd, down 319 MMcfd from 2013. Field decline and lower entitlement volumes were partly offset by new production from Papua New Guinea and work programs.
ExxonMobil's downstream earnings for the quarter were $1 billion, up $432 million from third-quarter 2013. Stronger margins, primarily refining, increased earnings by $820 million.
Chevron Corp. reported earnings of $5.6 billion for this year's third quarter compared with nearly $5 billion in 2013's third quarter. Foreign currency effects increased earnings in the quarter by $366 million compared with a decrease of $276 million a year earlier.
The company's US upstream earnings of $929 million in the third quarter were down $97 million from the same quarter a year earlier, as gains on asset sales, lower exploration expenses, and higher oil production were more than offset by lower oil prices and higher operating expenses. International upstream earnings of $3.72 billion were $346 million lower than 2013's third quarter.
In this year's third quarter, Chevron's average sales price of crude oil and natural gas liquids in the US was $87/bbl, down from $97/bbl a year ago. The average international sales price for crude oil and natural gas liquids in the quarter was $93/bbl, down from $104/bbl a year earlier.
The company's downstream operations in this year's third quarter earned $809 million in the US and $578 million internationally compared with respective $249 million and $131 million a year earlier, thanks to higher margins on refined product sales.
ConocoPhillips announced third-quarter earnings of $2.7 billion compared with third-quarter 2013 earnings of 2.5 billion. Excluding special items related to the sale of the Nigerian business, adjusted earnings were $1.6 billion compared with third-quarter 2013 adjusted earnings of $1.8 billion, as a result of lower realization prices and higher operating costs associated with increased turnaround activity, partially offset by higher volumes.
The company's quarterly production in the Eagle Ford and Bakken shale areas collectively delivered a 33% increase compared with the third quarter of 2013. Liquids production in the Lower 48 increased 19% year-over-year with a 25% increase in oil production.
Devon Energy Corp. posted net earnings of $1.04 billion for the quarter. This compares with third-quarter 2013 net earnings of $429 million. In the third quarter, total production from Devon's retained assets averaged 640,000 boe/d, representing a 19% increase vs. last year. The most significant growth came from the company's US operations, where oil production increased 77% over the previous year's third quarter.
EOG Resources Inc. reported net income of $1.1 billion for this year's third quarter, up from third-quarter 2013 net income of $462.5 million. In the third quarter, EOG's US crude oil and condensate production increased 29% compared with the same period last year. Production gains from the South Texas Eagle Ford, North Dakota Bakken, and Delaware basins led EOG's crude oil production growth.
Hess Corp.'s net income for the third quarter was $1.03 billion compared with $418 million in third-quarter 2013. Adjusted net income, excluding items affecting comparability, was $377 million compared with $405 million in the year-ago quarter. Lower realized crude oil prices and higher depreciation expense in this year's third quarter were the primary drivers for the decrease in adjusted net income. The company's oil and gas production of 318,000 boe/d was up 3% from last year's third quarter.
Houston independent Apache Corp.'s noncash charges resulted in a third-quarter net loss of $1.2 billion. Adjusted earnings, which exclude certain items that impact the comparability of results, totaled $528 million.
Refiners
Valero Energy Corp. reported net income of $1.06 billion for this year's third quarter compared with $324 million for third-quarter 2013. Operating income in the third quarter was $1.7 billion vs. $532 million in third-quarter 2013, reflecting wider gasoline discounts for sweet and sour crude oils relative to Brent crude, stronger gasoline margins in most regions, and higher refining throughput volumes. These positive drivers were partially offset by weaker distillate margins relative to Brent crude and higher gas costs in this year's third quarter.
Tesoro Corp. reported third-quarter net income of $413 million compared with a net income of $109 million for 2013's third quarter. The company recorded refining segment operating income of $578 million in the most recent quarter compared with a segment operating income of $128 million a year earlier. The Tesoro Index was $12.32/bbl for the quarter, up nearly $4/bbl. The California and Pacific Northwest regions experienced an increase in the Tesoro Index compared to last year, as a result of improved market fundamentals.
The retail segment's operating income was $138 million, an increase of 146% year-over-year from $56 million in last year's third quarter.
HollyFrontier Corp. posted third-quarter net income of $103 million for the quarter ended Sept. 30 compared with $48.5 million for the same quarter a year ago, mainly reflecting higher third-quarter refining margins. Refinery margins were $15.59/bbl, a 47% increase from third-quarter 2013.
Phillips 66 recorded refining earnings of $558 million in the third quarter compared with earnings of $390 million. The increase was primarily attributable to improved realized refining margins, which included capturing crude location differentials. Margins improved, despite lower worldwide market crack spreads, primarily due to higher clean product realizations and lower crude prices.
Canadian firms
All financial figures in this section are presented in Canadian dollars unless noted otherwise.
Encana Corp. reported $3.17 billion in third-quarter earnings compared with profits of $210.7 million a year earlier. The results for the latest quarter include aftertax gains on divestitures of $2.4 billion. The company's third-quarter operating earnings increased 87% over the same period last year to $281 million. Quarterly revenues increased 64% to $2.5 billion from a year earlier.
Encana's earnings for the most recent quarter benefited from higher liquids production and cost savings. Third-quarter oil production reached 62,100 b/d, up 128% compared with the same period in 2013 and 82% over last quarter. This increase was driven in part by volumes from the recently acquired Eagle Ford position, which accounted for 37,600 b/d of liquids production. Natural gas liquids production during the third quarter averaged 41,900 b/d, an increase of 35% year-over-year and 23% over last quarter.
Suncor Energy Inc. incurred net earnings of $919 million for this year's third quarter, down from $1.7 billion for third-quarter 2013. The decrease in earnings from the prior year was primarily due to lower production volumes in exploration and production and lower upstream price realizations, consistent with a decrease in benchmark prices.
Included in Suncor's third-quarter results was an aftertax foreign exchange loss on the revaluation of US dollar denominated debt of $394 million, compared to an aftertax foreign exchange gain of $138 million and an aftertax gain of $130 million from the sale of the conventional gas business in the prior year's quarter.
Suncor's highlights of the current quarter results include strong oil sands operations production and strong refinery utilization at refining and marketing that took advantage of a favorable downstream business environment.
TransCanada Corp. reported net income of $506 million for this year's third quarter compared with $534 million for the same quarter a year ago. Higher earnings from Keystone, Mexican pipelines, and US power were offset by lower contributions from western power, US pipelines, and gas storage.
