OGJ GROUP SHOWS SHARP REBOUND IN EARNINGS

Robert J. Beck Economics Editor Valerie Sanders Statistics Editor First quarter 1993 profits for Oil & Gas Journal's group of 22 large U.S. oil companies totaled $4.136 billion, a big turnaround from a loss of $956 million in the same period of 1992. The pronounced improvement flowed mainly from one time charges that depressed earnings last year. Last year the adoption of new accounting rules associated with future postretirement costs led to significant one time charges. Sixteen of the

June 21, 1993

5 min read

Robert J. Beck
Economics Editor

Valerie Sanders
Statistics Editor

First quarter 1993 profits for Oil & Gas Journal's group of 22 large U.S. oil companies totaled $4.136 billion, a big turnaround from a loss of $956 million in the same period of 1992.

The pronounced improvement flowed mainly from one time charges that depressed earnings last year.

Last year the adoption of new accounting rules associated with future postretirement costs led to significant one time charges. Sixteen of the companies posted losses. For the first quarter this year, none booked a loss.

U.S. exploration and production earnings improved this year due to higher crude oil and natural gas and greater volumes of gas production for some companies.

Earnings from non-U.S. exploration and production also benefitted from higher crude oil prices. However, group results were mixed and depended on changes in production volumes and exploration costs. Earnings from refining/marketing and chemicals also were mixed with no clear trend. Margins were generally considered weaker than those in 1992 except on the U.S. West Coast.

Group revenues were up 1.1% from the same quarter of 1992 at $103.3 billion. Higher crude oil, natural gas, and product prices contributed to the increase.

Sixteen companies reported their capital and exploration spending for the first quarter, with 11 showing a decline. Total spending by those companies fell 14.7% to $6.665 billion from $7.814 billion in first quarter 1992, This year's spending represented 173% of earnings for the 16 companies. Last year the group spent $7.8 billion while posting a first quarter loss of $1.089 billion.

Exxon Corp. led the way with outlays of $1.185 billion, down 18.6% from last year. Companies that disclosed increases in spending were Amerada Hess Corp., up $29 million, Occidental Petroleum Corp., up $27 million, ARCO, up $26 million, Murphy Oil Corp., up $26 million, and Kerr-McGee Corp., up $16 million.

EXPLORATION, PRODUCTION

Most companies in the group listed gains from U.S. exploration and production compared with the same period last year. The trend in earnings from non-U.S. exploration and production was not as pronounced.

Higher crude oil and natural gas prices and more efficient, lower cost operations helped boost profits in the U.S. The improvement was offset in part by lower crude oil production for some companies.

The futures price for light sweet crude on the New York Mercantile Exchange averaged $19.87/bbl for first quarter 1993, up 5.1% from $18.91/bbl for same period a year earlier. Natural gas prices moved up substantially, with the spot price averaging $1.79/Mcf in the first quarter this year, up 42.1% from the same period of 1992.

Energy Information Administration data show the price of world export crude oil averaged $16.92/bbl for first quarter 1993, up 3.5% from the same period a year earlier.

U.S. crude oil production averaged 6.995 million b/d for the first quarter of this year, down 4.8% from the same period in 1992. For the first 2 months of the year U.S. dry gas production was at the same level of a year earlier at 3.009 tcf.

Chevron Corp.'s first quarter earnings from U.S. exploration and production jumped to $195 million from $53 million in the same period last year.

Earnings improved on higher oil and gas prices and significantly reduced production expenses, partially offset by lower production volumes. Production costs fell more than $100 million or about 60cts/bbl.

Chevron received an average crude oil price of $15.36/bbl in the first quarter, up $1.18/bbl from the same period of 1992. Its liquids production fell 14% and gas production was 16% lower than a year earlier, mainly due to sales of producing leases.

Mobil Corp. posted first quarter earnings of $117 million from U.S. exploration and production, up from a loss of $27 million in first quarter 1992. The increase stemmed from higher oil and gas prices and the success of cost cutting efforts, which more than offset lower production due to asset sales and normal field declines. Mobil's U.S. oil production slipped 5% to 302,000 b/d. Natural gas production fell 10% to 1.626 bcfd. Receipts for crude oil advanced 7% to $14.70/bbl, and gas prices were up 35% at $2/Mcf.

REFINING, MARKETING

The shift in profits from downstream operations varied, with some companies posting gains and others showing a decline from levels a year ago. This was the case for U.S. and non-U.S. refining and marketing.

U.S. first quarter 1993 demand for petroleum products averaged 17.021 million b/d, up 0.8% from last year, EIA reported. The International Energy Agency estimated world demand outside the C.I.S. and China inched up 1.5% to 59.2 million b/d for first quarter 1993.

The American Petroleum Institute estimated U.S. refinery crude runs were up 1.6% in the first quarter at 13.045 million b/d. Refinery utilization rate increased to 86.2% from 83.6% last year. Operable refining capacity in the U.S. was down 1.4% at 15.405 million b/d.

U.S. refiners' crude feedstock costs averaged $17.59/bbl for first quarter 1993, up 6.9% from $16.46/bbl in the same period of 1992. Product prices also rose. Average pump price for all types of motor gasoline increased 4.2% to an average $1.172/gal for the first quarter this year. For the first 2 months of 1993, the price of home heating oil averaged 94.5cts/gal, up 0.4%.

However, for the first 2 months of this year average Gulf Coast refining cash operating margins, as computed by Wright Killen & Co., Houston, were $1.17/bbl, up from an estimated 90cts/bbl in the same period of 1992.