OGJ200 Companies Posted Strong Financial Year In 1997

Sept. 7, 1998
Some key changes from 1998 OGJ200 [32,160 bytes] Top companies in return on... [116,467 bytes] Fastest growing companies [44,540 bytes] Top 20 in total revenue [17,452 bytes] The top 20 in net income and stockholders' equity [34,860 bytes] The top 20 in spending and U.S. net wells drilled [34,248 bytes] The top 20 in liquids reserves [32,419 bytes] The top 20 in liquids production [31,317 bytes] The top 20 in gas reserves [32,301 bytes] The top 20 in gas production [30,147 bytes]
Robert J. Beck
Associate Managing Editor

Laura Bell
Statistics Editor

Companies on the OGJ200 list of publicly traded oil and gas producers in the U.S. posted a second straight strong financial year in 1997. Net income slipped but was still at the second highest level on record.

Most other indicators of financial and operating performance remained at high levels or posted increases in 1997.

Net income for the OGJ200 group slipped to $32.5 billion in 1997 from the record high group earnings of $33.8 billion in 1996. But it was the second highest annual OGJ group profit total since the list was started. In 1995, OGJ200 profits totaled $18.6 billion. The lowest OGJ group profit was $5.2 billion in 1986 when the group contained 400 companies.

As always, data for this year's list reflect the prior year's operations.

Total OGJ200 group revenues slipped to $560.8 billion in 1997 from $586.1 billion in 1996. The highest group revenue was $626 billion in 1983.

Assets for the OGJ200 group totaled $522.1 billion for 1997, up from $512.4 billion for 1996. This is the highest asset total since 1985 for the OGJ group, which in the past has comprised as many as 400 companies. The highest total OGJ group assets were posted in 1983 at $543.8 billion.

Total stockholders' equity of the companies represented by this year's OGJ200 increased 6.4% to $204.2 billion in 1997.

Comparisons between totals for one year's OGJ200 with those for another year must take into account the company changes that occur. But for any given year the OGJ list does represent a significant part of the U.S. oil and gas industry and does accurately reflect industry activity and financial performance.

The OGJ200 ranks companies by assets without regard to whether they use the full cost or successful efforts method of accounting.

Strong earnings in 1996 and 1997 led to an increase in capital and exploration spending. Outlays for the OGJ200 group totaled a record high $71.9 billion in 1997, compared with $61.5 billion in 1996 and $53.8 billion in 1995.

The increase in capital spending gave a boost to exploration and drilling activity. Net wells drilled by the OGJ200 increased to 13,036 from 10,834 in 1996. It was the highest number of wells drilled by the OGJ group since 1985.

The market

The strong showing in 1997 by the OGJ200 was primarily due to rising worldwide demand for oil and natural gas.

Increased efficiency and new technology also helped results.

In most regions of the world, petroleum product consumption increased last year. The gain included the now economically depressed developing areas in the Asia-Pacific region. The economic troubles in that region were surfacing in 1997, but the slowdown had not taken the full toll on petroleum demand. In the former Soviet Union (FSU) consumption moved up for the first time since 1990.

According to the International Energy Agency (IEA), oil consumption worldwide increased 3% to average 73.8 million b/d in 1997. In member countries of the Organisation for Economic Cooperation and Development (OECD), petroleum consumption increased 1% to average 41.9 million b/d. Most of the gain was in North America, where increased economic activity helped boost demand 2.5% to an average of 20.8 million b/d. Demand in OECD Europe increased only 0.7% to 14.5 million b/d.

In the non-OECD countries, including the FSU, product demand moved up 5% last year to average 31.9 million b/d. The largest increase was in Asian countries. Demand in China moved up 11% to average 4 million b/d. Elsewhere in non-OECD Asia demand increased 7% to 9.1 million b/d. Demand in Latin America increased 5% to average 6.6 million b/d.

Demand in the FSU moved up to an average 4.4 million b/d in 1997 from 4.3 million b/d in 1996 after falling every year since 1990.

In the U.S. petroleum product consumption moved up 311,000 b/d to average 18.620 million b/d in 1997, second highest on record (to 1978's level). Demand was up for all of the major product groups except residual fuel oil.

Consumption of motor gasoline increased 126,000 b/d to a record high 8.017 million b/d in 1997. Distillate demand moved up 70,000 b/d to average 3.435 million b/d. Jet fuel demand moved up 21,000 b/d to average 1.599 million b/d.

Worldwide natural gas consumption slipped in 1997 to 77.6 tcf. The decline was due to a sharp drop in the FSU, where gas use fell 6% to 17.4 tcf. Gas consumption in Europe fell 0.6% to 14.7 tcf. In contrast, demand in Central and South America moved up 6% to 3.1 tcf. In Asia-Pacific it increased 5% to 8.8 tcf. Demand in the Middle East was up 5.5% at 5.6 tcf and in Africa, up 12% at 1.8 tcf.

The largest regional demand was in North America-26.1 tcf, up 0.4%.

In the U.S., gas consumption increased 0.1% to 21.98 tcf.

Prices strong

Demand growth kept oil prices strong in 1997, although down from year-earlier levels, and pushed gas prices up.

The world export price of crude oil averaged $18.38/bbl in 1997, down from $20.04/bbl in 1996 but up from $16.78/bbl in 1995 and $15.28/bbl in 1994.

The futures price of light sweet crude oil on the New York Mercantile Exchange (Nymex) averaged $20.59/bbl in 1997, down from $22.01/bbl in 1996. And the average U.S. wellhead price for crude oil slipped to $17.24/bbl from $18.46/bbl in 1996. The wellhead price averaged $14.62/bbl in 1995 and $13.19/bbl in 1994.

The average U.S. refiner acquisition cost of crude for the composite of domestic and imported crude oil was $19.08/bbl, down from $20.71/bbl in 1996.

In the U.S., some product prices also slipped in 1997 following the trend in crude oil prices. But product prices held up better than crude prices and increased refining margins. The refiner price for motor gasoline fell to an average 70¢/gal from 71.3¢/gal in 1996. This was in contrast to the average pump price for all types of motor gasoline, which moved up to $1.291/gal from $1.288/gal the year before.

The refiner price for finished aviation gasoline increased to $1.066/gal from $1.055/gal in 1996. The refiner price for No. 2 diesel fuel averaged 60.6¢/gal, compared with 65.9¢/gal in 1996. The price of resid sold from refiners to end-users fell to 42.3¢/gal from 45.5¢/gal in 1996.

Strong demand enabled refiners to hold product prices in the face of lower crude oil costs. According to Wright Killen, the average U.S. Gulf Coast cash operating margin increased to 83¢/bbl in 1997 from 71¢/bbl in 1996 and 25¢/bbl in 1995. Increased volumes lowered unit operating costs.

The average U.S. wellhead price of natural gas increased to $2.42/Mcf from $2.25/Mcf in 1996 and $1.55/Mcf in 1995. The average spot price for natural gas increased to $2.44/Mcf from $2.30/Mcf the year before and $1.57/Mcf in 1995. The higher gas prices slowed the rate of increase, but U.S. consumption of natural gas still moved up in 1997.

Drilling up

Drilling activity increased throughout the world in 1997.

With drilling activity in the U.S. increasingly focused on natural gas, the price gains for gas in 1996 and 1997 had a leverage effect. The number of active rotary rigs in the U.S. averaged 944 in 1997, compared with 779 in 1996 and 723 in 1995.

The active rotary rig count in Canada also moved up on the strength of strong demand and rising prices in 1997, increasing to 375 from 270 in 1996 and 229 in 1995.

Drilling outside the U.S. and Canada benefited from strong crude oil prices worldwide coupled with strong demand. The average international rig count excluding the U.S. and Canada increased to 809 in 1997 from 793 in 1996 and 759 in 1995.

Financial performance

In 1997, 139 companies posted profits vs. 163 a year earlier and 121 in 1995.

In 1997 the number of companies posting net income exceeding $100 million slipped to 32 from 34 for 1996. Only 18 companies had profits that large in 1995, 23 in 1994, 24 in 1993, 19 in 1992, 18 in 1991, and 30 in 1990.

A total of 61 OGJ200 companies posted net losses for 1997. This compares with 37 in 1996, 79 in 1995, 116 in 1994, 108 in 1993, and 125 in 1992.

Four companies posted losses greater than $100 million, compared to none last year. There were eight companies with losses of $100 million or more in 1995, four in 1994 and 1993, and seven in 1992.

With the drop in net income, other indicators of financial performance slipped in 1997. Return on assets for the OGJ200 group fell to 6.2% from a high of 6.6% the year before. But 1997 was the second best year since the OGJ list was started. Prior to 1996 and 1997 the best year for return on assets was 5.7% in 1982.

Group return on assets was only 3.9% in 1995 and 3.3% in 1994. For the OGJ300 group of companies the ratio was 3.9% in 1993, 2.2% in 1992, 3.4% in 1991, and 4.7% in 1990. The lowest level for group return on assets was 1% in 1986.

In 1997 the return on revenue for the group remained at the all time high of 5.8% set in 1996. This was up from 3.6% in 1995. The ratio remained constant last year because net income and total group revenues fell at about the same rate. Return on revenue was 3.3% in 1994, 3.9% in 1993, 2.1% in 1992, 3.3% in 1991, and 4.3% in 1990. The highest previous group return on revenue was 5.1%, posted in 1988. The lowest return on revenue was 1.2% in 1986.

Return on stockholders' equity slipped to 15.9% in 1997 from the record group high of 17.6% in 1996. Return on stockholders' equity was 10.7% in 1995, 9.4% in 1994, 10.9% in 1993, 6.4% in 1992, 9.8% in 1991, and 13.6% in 1990. Before 1996, the previous record for this measure of performance was 13.8% in 1982, and the low was 3% in 1986.

The high rates of return on investment have led to higher levels of capital spending the past 2 years. The OGJ200's 1997 capital and exploration spending total of $71.9 billion was the highest for the group since the list was started in 1983. The previous highs were $66.5 billion in 1983 and $66 billion in 1985, when the list contained 400 companies. That was prior to the price crash in 1986 that sent the industry into recession.

Group operations

Most of the indicators of OGJ200 group operations moved up in 1997. Only U.S. natural gas production and reserves were lower in 1997 than the year before.

Group worldwide natural gas production moved up 2% to 17.4 tcf, the highest output since the OGJ group started. Total worldwide natural gas production was down 0.2% in 1997 at 78.5 tcf.

U.S. natural gas production for the OGJ200 slipped 0.1% to 11.6 tcf. Total U.S. marketed natural gas output was up 0.5% at 19.8 tcf for 1997.

Group natural gas production outside the U.S. increased 8% to 5.8 tcf in 1997. Worldwide production outside the U.S. and the FSU was up 3.5% in 1997.

OGJ200 worldwide liquids production increased 3% in 1997 to 3.375 billion bbl. U.S. liquids production increased 0.5% to total 1.821 billion bbl. The group's non-U.S. output was up 6% at 1.554 billion bbl.

Again in 1997, both worldwide liquids reserves and natural gas reserves increased. Worldwide liquids reserves moved up 7% to 37.1 billion bbl. Group worldwide liquids reserves moved up for the fourth consecutive year after falling for 5 years.

Non-U.S. reserves were up 11% in 1997 at 16.6 billion bbl. Group U.S. liquids reserves moved up 5% to 20.5 billion bbl. This was the third consecutive year for increased group U.S. liquids reserves.

Worldwide natural gas reserves for the OGJ200 group moved up in 1997 for the fifth consecutive year after four consecutive declines. Group worldwide natural gas reserves increased 3% to 195.3 tcf. Group natural gas reserves in the U.S. fell 2% to 108.2 tcf. Non-U.S. natural gas reserves moved up 10% to 87.1 tcf in 1997.

Changes in the group

This year's list contains 16 companies not represented in years before. The previous year there were eight new companies on the OGJ200 list.

The list contains four publicly traded limited partnerships (LPs).

Last year there were also four LPs. The largest LP is Hallwood Energy Partners, with assets of $131.6 million. The smallest LP on the list, Apache Offshore Investment Partners, had assets of $10.5 million.

There are seven royalty trusts listed. Last year there were eight. There are 21 companies that are subsidiaries of non-U.S. energy companies or of companies operating mainly in another industry.

The last company on this year's OGJ200 list had 1997 assets of $2.062 million.

The asset value of the No. 100 company on this year's list is $179.6 million. Last year the top-100 assets cutoff was $129.4 million and the year before, $116.9 million.

Top 20 companies

In 1997 there was one new company in the top 20 companies ranked by assets. Union Pacific Resources moved into the No. 20 spot from No. 24 last year. Ashland Oil had been in the top 20 but sold its U.S. producing properties and no longer qualified for the OGJ200.

There was also some reshuffling of asset position. Enron moved up to No. 8 from No. 9 the year before. Occidental slipped to No. 10 from No. 8. Conoco climbed to No. 9 from No. 10. Amerada Hess moved to No. 15 from No. 16 as Unocal slipped to No. 16 from No. 15.

With Ashland dropping off the list some companies climbed a position on the list. Columbia Energy moved up to No. 17 from No. 18, Consolidated Natural Gas to No. 18 from No. 19, and Burlington Resources to No. 19 from No. 20.

The top 20 companies had total assets of $434 billion at year-end 1997, up from $426 billion for the top 20 companies a year earlier.

Assets of the top 20 companies represented 83% of total group assets in 1997, the same as for 1996. Top 20 represented 84% of total group assets in 1995 and 83% of the OGJ200 total in 1994.

The top 20 received revenues of $512.3 billion in 1997, down from $536.7 billion in 1996. This was 91% of total revenues for the OGJ200, down from 92% the previous year.

The collective net income of the top 20 was $30.6 billion, compared with $29.9 billion in 1996 and $18.2 billion in 1995.

For 1997 the net income for the top 20 was 94% of the OGJ200 total, compared with 88% in 1996.

Two subsidiary companies in the top 20, Conoco and BP (USA), do not report stockholders' equity. Total stockholders' equity for the remaining 18 companies of the top 20 totaled $169.4 billion, up from $160.6 billion in 1996. This was 83% of the OGJ200 total stockholders' equity.

Capital and exploration expenditures in 1997 by the top 20 group totaled $53.6 billion, up from $46.2 billion in 1996, $41.1 billion in 1995, and $37.8 billion in 1994. This was 75% of the OGJ200 total capital spending in 1997.

The top 20 companies drilled 6,151 net wells in 1997, up from 4,882 in 1996 and 4,147 in 1995. The top 20 drilled only 3,599 net wells in 1992. In 1997 this was 47% of total wells drilled by the OGJ200 group of companies.

The top 20 companies accounted for 86% of the group's worldwide liquids production and 81% of its U.S. liquids production. They had 76% of the worldwide natural gas production and 67% of the U.S. natural gas production.

The top 20 hold 86% of the OGJ200 group's worldwide liquids reserves and 81% of U.S. liquids reserves. They also have 79% of the group's worldwide natural gas reserves and 68% of the U.S. natural gas reserves.

OGJ200 shares

The OGJ200 group's total revenue of $560.8 billion in 1997 was equal to 7% of U.S. gross domestic product (GDP), down from just less than 8% in 1996. Revenues as a percentage of GDP have been falling since the group list was started. The OGJ group revenues were as much as 18% of GDP in 1983.

The OGJ200 companies also posted a substantial share of total U.S. oil and gas production and reserves in 1997. The group's liquids production was 60% of the U.S. total. Group natural gas production was 59% of the U.S. total. The group has 69% of total U.S. liquids reserves and 65% of U.S. natural gas reserves.

On a worldwide basis the statistics for the OGJ200 group of companies are naturally not as impressive. National oil companies control a large portion of international reserves and production. The OGJ200 group holds 4% of both worldwide liquids reserves and natural gas reserves. In 1997 the group accounted for 13% of worldwide liquids production and 22% of worldwide natural gas production.

Fastest growing companies

Ranking for the OGJ200 list of the fastest growing companies is based on growth in stockholders' equity. To make the list, companies must have had positive net income for 1997 and 1996 and an increase in net income in 1997. Subsidiary companies, newly public companies, and LPs are not included.

Most of the fastest growing companies posted substantial increases in net income in 1997. Eleven of the 20 companies in the fast-growth list had increases in net income of 50% or more.

The long term debt positions of the companies on the list were mixed. Eleven of the companies increased long term debt, seven decreased long term debt, and two were unchanged. Four of the companies eliminated all long term debt, and one did not carry long term debt in either year.

Texoil led the list this year. Its stockholders' equity moved up 337%, and net income increased 73% to $638,000 in 1997. Texoil ranked 143 in total assets.

Five of the companies were on the fast-growth list last year: Royale Energy, Global Marine, Tom Brown, Pogo Producing, and Adams Resources & Energy. It was the third year in a row for Global Marine and Royale Energy.

Copyright 1998 Oil & Gas Journal. All Rights Reserved.