Joan Bonfield Biggs
Statistics Editor
Robin Buckner Price
Staff Writer
First half 1991 profits showed an unexpected increase for a group of U.S. independent companies Oil & Gas Journal tracks.
The increase occurred in spite of low natural gas prices and an overall sluggish U.S. petroleum industry.
Crude oil and natural gas production showed modest gains, and although gas prices remained low, steady oil prices helped buoy the 50 company group.
Newcomers to the group are Vintage Petroleum Co., Tulsa, and Parker & Parsley Petroleum Co., Midland, Tex., who are taking the places of Ocean Drilling & Exploration Co. and Hamilton Oil Corp.
Odeco was acquired by Murphy Oil Corp., and Hamilton was acquired by Broken Hill Pty. Ltd., both integrated companies.
EARNINGS
Most of the group showed at least modest gains in net profits during first half 1991, but most of the total increase stemmed from a couple of one time boosts.
Profits for the group increased 584% in first half 1991 to $696.76 million, compared with the same period of 1990.
The biggest jump was posted by Union Texas Holdings Inc., Houston, with a net profit increase of $198 million, making up more than one third of the entire gain for the group.
That figure includes $165 million from the sale of its U.S. offshore oil and gas business.
Pacific Enterprises Oil Co. made up most of the remaining increase, with a net change of $267 million, having posted a $209 million loss during the first half of 1990 because of special charges.
Companies showing gains pegged success on an integrated natural gas business, as well as the ability to capitalize on higher crude prices with a strong proportion of oil in their production mix.
Although Apache Corp. Denver, had a decrease in profits for first half 1991, it noted that improved earnings in the gas gathering, marketing, and processing sectors and increased oil production helped counter the effect of gas prices.
Many companies reported lower operating expenses this year due to restructuring ' consolidating, and streamlining efforts, which also bolstered profits.
PRODUCTION, PRICES
While some companies increased gas production to make up for low prices, others shut in gas wells as uneconomical. Either way, companies with a strong crude base generally fared better.
Overall, 81% of the independents reporting production for first half 1991 posted increases in crude production. Gas production was more evenly split, with 59% reporting increases during the half.
All of the companies reporting crude prices realized an average increase, while only one company, Arkla Exploration Co., reported an increase in gas prices.
Total crude production for the group rose 4% to 529,820 b/d during first half 1991, up from 508,992 b/d in the same period last year. The group's average crude price was $19-95/bbl in the first 6 months this year, compared with $17.80/bbl last year.
Gas production rose 3.59% this year to a total of 5.677 bcfd even though wellhead prices nosedived 10.35% to an average $1.60/Mcf from last year's first half average of $1.78/Mcf.
Pogo Producing Co., Houston, increased its crude production by 20% this year and managed a 3% increase in gas production.
Paul G. Van Wagenen, Pogo chairman and chief executive officer, said, "Our low risk development drilling onshore and offshore has, in addition to increasing overall daily deliverability, allowed us the financial flexibility to voluntarily curtail up to 50 MMcfd of natural gas deliveries when prices were unacceptable to the company."
Parker & Parsley logged a 72% increase in crude production during the half and a 59% increase in gas production, while realizing crude oil prices only 1% higher than first half last year and gas prices 1% lower.
Scott D. Scheffield, Parker & Parsley chairman and president, said the company derives more than two thirds of its revenue from oil and natural gas liquids, limiting its exposure to weak gas prices.
This year the company bought the assets of eight oil and gas partnerships associated with Damson Oil Corp.
EIA SURVEY
The Energy Information Administration's report on the industry's financial performance in this year's second quarter tracked a group of 40 independent oil and gas producers. EIA's group booked a net loss of $2 million, off 6.1% from last year, with two companies strongly influencing the total.
Oryx Energy Co., Dallas, sold its North Sea production, which resulted in a large loss for second quarter. On the other hand, Adobe Resources Corp., New York, placed its Ship Shoal Block 299 on production in the Gulf of Mexico, which cut its losses substantially compared with second quarter 1990.
EIA said if those two companies are excluded from its survey, its group of independents posted a 5% decline in income.
EIA said the major difference in the financial performance of its group of independents and its group of majors, which posted a 73% increase in income for domestic oil and gas operations, is the importance of gas production as a source of income.
For its group of 40 independents, gas reserves made up 57% of total petroleum reserves on an energy equivalent basis, while for the majors gas made up 42% of total reserves.
THIRD QUARTER
Most companies reporting third quarter 1991 results listed a decline in profits.
Mesa said it expects revenues and operating expenses for the third quarter to be about one third lower than the $66 million in revenues and $64 million of operating expenses reported for third quarter last year, reflecting $433 million of property sales and lower gas prices.
In a related announcement, Mesa is mailing definitive proxy material to its unitholders on a proposal to convert to corporate form.
At one time being a master limited partnership served Mesa well (OGJ, Sept. 22, 1986, p. 20). However, T. Boone Pickens, Mesa general partner and formerly a strong advocate of limited partnerships as an investment vehicle said, "Conversion of Mesa to corporate form is an important step in reestablishing Mesa in the investment community as a premier owner and operator of natural gas reserves."
Meantime, Meridian Oil Inc. reported operating income for third quarter 1991 at $40 million, compared with $54 million same time last year.
And while Meridian's gas prices dropped another 10% for the period and its average oil price dropped 18%, gas and crude production rose 10% and 5% respectively.
Hondo Oil & Gas Co., Roswell, N.M., and Helmerich & Payne Inc., Tulsa, reported lower third quarter 1991 net income.
Hondo incurred a net loss of $19.06 million for the quarter, compared with a $892,000 profit in the same period last year. Latest results include a one time $750,000 charge resulting from restructuring.
Helmerich & Payne's third quarter 1991 net income was $2.7 million, compared with $5.57 million during third quarter 1990.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
