U.S. Petroleum companies for the most part have yet to see relief from hemorrhaging profits.
Most companies reporting first half earnings last week listed declines from the same time a year ago, with upstream and downstream sectors suffering alike. Generally, the only bright spots are non-U.S. operations.
And among a number of companies faring better this year, the year to year improvement stemmed from large writedowns taking a chunk out of first half 1991 earnings.
Declines were posted by Kerr-McGee 9% to $37 million, Union Texas 10% to $72 million, ARCO 18% to $489 million, Enserch 40% to $17 million, Plains Petroleum 59% to $3.9 million, Phillips 108% to a $10 million loss, Amerada Hess 113% to a $19 million loss, Anadarko 127% to a $3.5 million loss, Santa Fe Energy 155% to a $7 million loss, Mobil 200% to $382 million, and Maxus 1,000% to a $41.9 million loss.
Among companies showing year to year first half improvements were Murphy 172% to $527 million, Pennzoil 90% a $1.7 million loss, Noble 27% to $158 million, and Unocal 3% to $82 million.
Salomon Bros. has a simple explanation for U.S. companies' poor financial performance: "Exploration and production of oil and natural gas in the U.S. has been a terrible business... The domestic refining and marketing sector has not fared much better... Recession and industry overcapacity in the U.S. chemical operations of the majors have led to shrunken returns on investment (ROI)."
That's the gist of Salomon Bros.' new study of financial performance and capital flows of six majors the past 6 years. It puts U.S. ROIs in the period at 2.25-5.8% for E&P and 6-9% for R&M. Noting the shift of spending outside the U.S.--in 1991 the six earmarked 61% of capital outlays outside the U.S.--Salomon Bros. says, "This trend makes sense because the relative returns on oil and gas investments outside the U.S. are consistently higher than those available to the companies domestically." In 1991, earnings outside the U.S. for the six represented 77% of total earnings vs. 67% in 1990.
There's a glimmer of relief for U.S. independents, however.
The Senate last week rejected an amendment by Bill Bradley (D-N.J.) to kill AMT relief for independent producers. The relief measure, allowing independent producers to deduct as much as 60% of IDCs even if qualifying for AMT, is part of the Senate's comprehensive energy bill.
At presstime July 30, the Senate was debating the last few amendments and expected to name conferees for a joint bill in September, and IPAA Pres. Denise Bode saw a vote on the omnibus bill as imminent.
A Senate agreement to protect health care benefits for retired eastern coal miners was hammered out, clearing the way for the Senate to dispose of the bill. The bill had been stymied when the Senate rejected cloture July 23 to allow debate over the coal miners provision.
The House interior committee is expected to urge Justice to consider prosecuting Alyeska Pipeline and its security contractor, Wackenhut Corp., for alleged obstruction of the committee's inquiry into the Trans-Alaska Pipeline System's operations. The committee said Alyeska hired Wackenhut to spy on pipeline critic Charles Hamel and that it should be charged with obstruction of justice, wiretapping, and wire and mail fraud.
New York Times reports Mexico may impose a tax on trade across its northern border to raise money for environmental spending.
Environmental groups in the U. S. and Mexico have been pushing the tax because they fear pollution may increase in Mexico as U. S. companies open new factories there under the proposed North American Free Trade Agreement. Santiago Onate Laborde, Mexico's attorney general for protection of the environment, is the first Mexican official to say publicly his government is considering the issue, but he cautioned that no decision had been reached on how such a tax would work.
An Alberta gas producers' pool was expected to vote last week on the latest offer from Alberta & Southern after rejecting an earlier proposal from the PG&E buying unit. A&S is negotiating new terms on annual contracts that were to expire July 31. A&S has offered to buy an average 212 MMcfd at a fixed average price of about $1.52 (U.S.)/Mcf. It would buy another 200 MMcfd at prices periodically adjusted to the California market price. Prices in California and the U.S. Southwest would be used to set prices for an additional 361 MMcfd under an A&S purchase option. The contract would halve gas bought at fixed prices from about 40% of volumes sold under existing contracts. A&S and producers negotiate prices annually hut have an overall supply agreement in force to 2005 that is being challenged by California, which wants PG&E affiliate PGT's Alberta-California pipeline opened to capacity brokering this fall. Alberta and British Columbia governments are negotiating with California to settle the dispute.
Canadian Oxy keeps hitting the sweet spot on its Masila block in Yemen, this time a triple. Its 1 North Camaal well flowed 15,195 b/d, 1 Tawila 9,050 b/d, and 1 Haru 1, 126 b/d. At least one delineation well will be needed on each structure. With the latest strikes, CanOxy has found eight fields on its 4.94 million acre Masila block. There are two more prospects to be drilled. Canoxy and partners Occidental Petroleum and Royal Dutch/Shell expect production to start in September 1993 at 120,000 h/d.
BP has signed a technical services agreement with Kuwait Oil Co. to provide assistance in restoring Kuwait's oil production (see story, p. 29).
The initial 3 year agreement calls for BP to assist in development, production, reservoir management, damage assessment, drilling, and other areas. BP staff will go to Kuwait to act as consultants within KOC, and KOC will have access to BP's upstream technology and participate in R&D.
Cash payment is to he based upon service levels, staff experience, technology transfer, and number of projects. KOC and BP expect the first staff to he in place by end of summer and work fully under way by yearend.
Singapore refiners see their performance rebounding in the second half after a rocky first half. Margins lagged in January-April and recovered slightly in May-June, and second quarter output fell with shutdown of several units for turnaround and maintenance work.
Processing fees, now slightly more than $1/bbl, are expected to reach $1.30-1.50/bbl for term deals and as much as $2/bbl for some spot deals in the second half. That could leave net margins at 500-$1/bbl. Singapore refiners cite a spurt in products demand from Pakistan and India.
World Bank has reiterated its offer of an $870 million loan for Russia's western Siberia oil and gas industry if the republic raises its prices to the world level within a year, lowers taxes on the oil industry, and appoints appropriate personnel to oversee the industry's rebuilding.
And Yeltsin reiterated his stand on freeing energy prices gradually. "We have firmly told the International Monetary Fund we do not agree with its demand to immediately free prices," he said. He expects Russia's oil prices to be at world market levels by yearend 1993.
Meantime, Russia has enlisted the aid of an international group of western advisers to guide it through privatization. Moscow established the State Committee of the Russian Federation for the Management of State Property to oversee and direct the privatization process and let a contract to a group led by Deloitte Touche Tohmatsu unit Braxton Associates, Credit Commercial de France, and communications firm BBDO Worldwide to guide the effort to turn state and municipal businesses over to private hands.
Bidding for the contract was conducted through European Bank for Reconstruction and Development in association with World Bank.
White Nights may be joining the group exempted from Russia's $7/bbl crude export tax (OGJ, July 13, p. 24). Gilles Labbe, president of White Nights partner Anglo-Suisse, says the joint venture received word it will be granted the exemption and expects the official decree any day.
However, Anglo-Suisse will have to negotiate exemptions for its Golden Mammoth and Northern Lights projects separately.
Meantime, nearly a third of Moscow's service stations are slated for privatization by yearend, and bidders are eagerly lining up to buy them, the Russian business weekly Commersant reports.
Eight stations in various parts of Moscow will be offered for sale at the first auction, with starting prices of 100,000-2 million rubles. Only Russian investors, who also will obtain rights to 25 year leases, are eligible to participate in the first auction. Under privatization rules, station owners will not be allowed to sell their properties for at least 3 years, and the facilities must remain open around the clock. New proprietors must provide jobs for current employees and must "diversify their services."
Copyright 1992 Oil & Gas Journal. All Rights Reserved.