FIRST QUARTER PROFITS ADVANCE FOR OGJ GROUP

Robert J. Beck
Economics Editor

Joan Bonfield Biggs
Statistics Editor

First quarter profits for Oil & Gas Journal's group of 22 large U.S. oil companies jumped 24.8% from first quarter 1990 to total $7.065 billion.

Although group profits were up sharply, results were mixed for individual companies with 11 companies reporting gains and 11 listing declines. None posted a loss for the quarter this year or last.

The group improvement came as a result of a jump in refining earnings by some larger companies. Some also showed improvements in earnings from chemical operations. That was in marked contrast to a year ago, when a slump in refining and chemical earnings resulted in a 26% drop in group profits.

There was no clear trend in exploration and production earnings this year. Profits outside the U.S. were stronger for some large international companies, but E&P results were mixed for the group.

Refining margins remained high throughout the first quarter. Oil & Gas Journal's calculation of estimated margins based on the nearest month futures prices averaged $3/bbl for the first quarter this year, compared with 37 cents/bbl for the same period of 1990.

Group revenues continued to move up, increasing 9% from first quarter 1990 to $121.7 billion. Revenues advanced on the strength of higher product prices and increased demand outside the U.S. Average crude oil prices in the first quarter were about the same as in 1990.

Fourteen companies disclosed their capital and exploration spending for the first quarter. Twelve listed increased outlays.

Spending by the 14 was up 24% to $8.406 billion, or 134.9% of earnings compared with 146.4% in 1990.

Mobil Corp. listed the largest dollar increase in spending with outlays of $1.266 billion, up 68.1 %from first quarter 1990. Exxon Corp. was No. 1 in spending at $1.819 billion, up 14.3%. Chevron Corp. increased spending 11.6% to $901 million.

PRICES, PRODUCT DEMAND

Oil prices were mixed during first quarter 1991.

The average world price for export crudes was $18.24/bbl for the period, compared with $18.14/bbl in first quarter 1990. On the New York Mercantile Exchange the futures price of light sweet crude averaged $21.56/bbl, compared with $23-54/bbl in 1990.

Latest Energy Information Administration data show the average pump price for all types of U.S. motor gasoline at $1.213/gal for first quarter 1991, up from $1.084/gal in 1990. Part of the 12.90/gal increase was a 5 cent hike in the federal tax on motor gasoline. State and federal taxes combined were up 6.3 cents/gal from first quarter 1990, accounting for almost half of the increase.

EIA estimates show first quarter U.S. petroleum product demand at 16.698 million b/d, down 1.9% from the same period of 1990. Motor gasoline demand averaged 6.822 million b/d, down 3.1%.

The International Energy Agency (IEA) estimates first quarter world demand at 67.4 million b/d, up 200,000 b/d. Excluding the U.S.S.R. and North America, demand is up 1.2 million b/d, or 3.1% over 1990.

REFINING, MARKETING

Higher product prices and relatively stable crude oil prices helped boost refining margins in the first quarter. Increased demand outside of the U.S. also helped buoy profits.

Exxon posted earnings of $256 million from U.S. refining and marketing operations, compared with a loss of $28 million for the same period of 1990. Outside the U.S. profits in this sector moved up to $1.097 billion from $219 million the year before.

Exxon said, "Margins in most markets were significantly improved over the 1990 quarter, reflecting the combined effect of declining crude prices and tight refinery conversion capacity."

Worldwide product sales advanced to 4.712 million b/d from 4.63 million b/d in first quarter 1990.

Mobil's refining and marketing profits from U.S. operations rose to $100 million from $39 million in the same period last year. Earnings from international operations jumped to $342 million from $53 million in 1990. In the U.S. the improvement reflected higher refining margins due to a tightening of industry refining capacity and excellent refinery performance, which significantly reduced gasoline purchases.

Outside the U.S., Mobil said, exceptionally strong refining margins throughout the system, particularly in the Pacific Rim, produced excellent results. Refining margins declined toward the end of the quarter, but earnings continued to be healthy as refining capacity remained tight and refinery production high.

Chevron booked U.S. refining and marketing earnings of $99 million, up from $59 million in first quarter 1990. International operations showed first quarter profits of $134 million, compared with $71 million in the first quarter last year. U.S. 1991 earnings were reduced by $47 million for environmental provisions and writeoffs. Average product prices were up 7% from the first quarter last year, although a recession and warm winter caused a 7% decline in sales volumes. Refining and marketing earnings outside the U.S. almost doubled as declining crude oil prices resulted in strong sales margins. A cold winter in Europe, along with tight product supplies, kept product prices firm.

Amoco Corp.'s worldwide refining, marketing, and transportation segment earned $214 million, up $85 million from first quarter 1990.

Texaco Inc.'s manufacturing, marketing and distribution earnings moved up to $271 million from $136 million in 1990. U.S. earnings doubled to $60 million, and international earnings were up $105 million at $211 million. The advance stemmed from larger sales volumes and moderately improved prices. Refined product sales in the U.S. moved up 33,000 b/d to 864,000 b/d.

Outside the U.S., 1991 earnings reflected larger refined product margins in the Caltex operating area, especially in Japan. Margins and sales also were strong in Europe due to tight supplies as demand rose because of cold weather.

CHEMICALS

Earnings from chemical operations were mixed. Chemical profits were down last year, falling from record levels of 1988 and 1989.

Exxon's earnings from worldwide chemicals were $223 million, up $42 million from first quarter 1990. The rise reflected better margins in the U.S. and abroad due to lower feedstock costs and higher prices in certain product groups.

Sales volumes were down 5% from the same period a year ago.

Mobil's chemical income moved up $9 million to $92 million for first quarter 1991.

Chevron's earnings were $73 million, compared with $123 million for 1990. However, 1990 profits included $59 million from agricultural chemicals licensing agreements. Without that item, earnings were up 14% as feedstock costs fell more than product prices.

Texaco's petrochemical earnings moved up slightly to $17 million from $16 million the year before. Higher capacity utilization during the latest quarter contributed to improved earnings in the U.S., but margins for all products worldwide continued to be weak.

Shell Oil Co.'s chemical earnings were down $27 million at $71 million for first quarter 1991. Sales volumes declined due to the economic slowdown in the U.S. Operating costs were higher because of increased maintenance and turnarounds.

Amoco's chemical earnings of $83 million compared to $85 million for first quarter 1990. Lower sales volumes and margins due to the downturn in the economy depressed 1991 profits.

EXPLORATION, PRODUCTION

Exploration and production profits outside the U.S. tended to be better than those in the U.S.

Total U.S. crude oil production in first quarter 1991 was an estimated 7.45 million b/d, compared with 7.46 million b/d during last year's first quarter. Alaskan production was up 41,000 b/d at 1.88 million b/d, while Lower 48 production slipped 51,000 b/d to 5.57 million b/d.

U.S. natural gas prices were lower than a year ago, also contributing to lower earnings.

Mobil's U.S. exploration and production income was down 32% at $66 million for the first quarter. International earnings moved up 12% to $305 million. Mobil said, "Natural gas prices, which reached the lowest levels in recent years, were particularly disappointing as unseasonably warm weather, lower industrial demand due to the recession, and lower prices for alternative liquid fuels continued to result in a highly competitive marketplace."

Increased gas sales and prices boosted earnings outside the U.S. The higher volumes reflected colder weather in Europe.

Chevron's earnings from U.S. E&P operations were $158 million in the first quarter, up $3 million from a year earlier. International earnings were up $27 million at $156 million. International earnings improved due to increased crude oil and natural gas production, which rose 4% and 8% respectively.

U.S. earnings in 1991 included $23 million from sales of marginal producing properties, while 1990 earnings were reduced by charges of $53 million for organizational restructuring and a tax adjustment. Excluding the special items, earnings declined due to lower prices and lower production of oil and gas.

Chevron's average crude oil price was down $1.15/bbl at $17.50/bbl, and average gas prices were down 16% at $1.62/Mcf. Liquids production declined 3% as a result of normal field decline and sales of producing leases. Natural gas production declined 8% because of an unusually warm winter.

Amoco's earnings from worldwide E&P dropped in first quarter 1991. U.S. earnings dipped to $218 million from $247 million in 1990. Non-U.S. earnings fell to $95 million from $105 million.

The decline in the U.S. reflected lower gas prices, lower crude oil production, and higher exploration expenses. That was partly offset by higher gas volumes. The decrease outside the U.S. resulted from increased exploration expense and unfavorable currency exchange.

Texaco's profits from U.S. E&P increased to $204 million from $199 million in 1990 due to higher liquids production and lower expenses. Those factors were offset somewhat by lower crude oil prices and lower natural gas earnings. The mild winter caused gas sales to decline 10% and realized prices to average $2/Mcf during first quarter 1991.

Exxon's earnings from U.S. operations dipped to $150 million in first quarter 1991 from $355 million in the same period a year ago.

Outside the U.S., earnings fell marginally--$9 million--to $721 million. U. S. liquids production fell to 631,000 b/d from 671,000 b/d the year before. Production outside the U.S. fell 67,000 b/d to 1.084 million b/d. U.S. natural gas production was down 11% at 1.731 bcfd. Outside the U.S. production was up 5.2% at 4.918 bcfd. Gas prices were down in the U.S. but up significantly in Europe.

Copyright 1991 Oil & Gas Journal. All Rights Reserved.