Marilyn Radler, Senior Editor - Economics, Oil & Gas Journal
Laura Bell, Statistics Editor, Oil & Gas Journal
The OGJ200 group’s collective earnings for the third quarter of 2006 (3Q06) climbed 20% from the third quarter of 2005. At the same time, they posted an increase in revenue of just 2%.
Some of the firms in the group reported earnings that benefited from higher oil price realizations, and the integrated operators capitalized on improved downstream performance.
There were also many companies in the group that recorded declines in earnings as compared to the third quarter of 2005. These declines in part were due to higher E&P operating expenses.
The OGJ200 list is made up of the publicly traded, US-based oil and gas producing firms that appear in Oil & Gas Journal’s most recent annual special report. The OGJ200 ranks the companies primarily by yearend assets (OGJ, Sept. 4, 2006, p. 20).
Changes to the group
Consolidation continues to cause the list of firms to shrink. The current OGJ200 group contains 134 companies as of the end of 3Q06. At the end of the third quarter of 2005, there were 136 firms in the group.
Two companies that appeared in the previous edition of the OGFJ200 Quarterly no longer appear in the group. These are Kerr-McGee Corp. and Western Gas Resources, which both merged into Anadarko Petroleum Corp. Each transaction was completed during August 2006.
Remington Oil & Gas Corp. in the previous OGJ200 Quarterly report was ranked No. 58. Last summer Remington was acquired by Helix Energy Solutions Group Inc., based in Houston. Helix currently ranks No. 24 by assets.
The 3Q2006 results of five of the qualifying firms are not included in this report, because as of press time they had not been filed with the US Securities & Exchange Commission.
Quarterly results
Downstream results, led by strong refining margins and marketing margins, drove profits for integrated companies. Due to healthy oil product demand, refinery utilization in the US averaged more than 92% during 3Q06, according to API.
Total disposition of motor gasoline and distillate moved up during 3Q06 as compared to the third quarter a year earlier, according to figures released by API. Distillate demand was up sharply, but demand for gasoline grew modestly. At the same time, disposition of jet fuel and residual fuel oil declined.
On average oil prices in the recent quarter were higher year-on-year, but natural gas prices declined. The average price at the wellhead for crude oil during 3Q06 was up 14% from a year earlier to $65.07/bbl. The spot price for gas at Henry Hub averaged $6.314/MMbtu in the recent quarter, down from $9.531/MMbtu a year earlier.
No. 1 by assets, ExxonMobil Corp. recorded a 6% increase in earnings for 3Q06 from the third quarter of 2005. This put the company’s net income at $10.49 billion for the recent quarter, up on stronger downstream and chemicals results. Meanwhile, the company’s quarterly revenue declined to $99.6 billion from $100.7 billion.
ExxonMobil said that lower refining margins partly offset higher oil and gas realizations and higher marketing and chemical margins during 3Q06. On an oil-equivalent basis, production increased 7% from the third quarter of 2005. Higher production from projects in West Africa and increased volumes in Abu Dhabi were partly offset by mature field decline, entitlement effects, and divestment impacts, the company reported.
Downstream earnings also drove No. 3 Chevron Corp. to a 40% earnings increase. The company reported that its downstream earnings increased nearly $900 million to $1.4 billion on improved product margins and refinery utilization. Meanwhile, upstream profits of $3.5 billion were up 5% on higher oil prices and production volumes.
Ranked No. 7 by assets, Marathon Oil Corp. reported downstream income of $1 billion in 3Q06, compared to $473 million in the corresponding 2005 quarter. The impetus behind this increase was the company’s refining and wholesale marketing gross margin, which averaged 32.7 c/gal in the recent quarter vs. 17.7 c/gal a year earlier.
No. 6 Occidental Petroleum Corp. was one of the firms in the group reporting earnings below those of the 2005 third quarter. The company’s earnings for 3Q06 were $1.17 billion, down from $1.75 billion.
Occidental attributes the decline to higher depreciation, depletion, and amortization of assets, while its capital expenditures climbed 28% year-on-year in the recent quarter. The company’s oil and gas production volumes in 3Q06 were up 14% from the third quarter of 2005.
Top 20 firms
Ranked by assets, the top 20 firms of the OGJ200 group posted a 17% earnings gain from a year earlier and a 1.7% revenue increase.
The OGJ200 not only ranks firms by assets but also details the top 20 companies as ranked by net income, revenue, capital spending, stockholders’ equity, and market capitalization.
ExxonMobil ranks first across all of these categories for 3Q06, but for the top companies in capital spending, ConocoPhillips was a close second. Through the first 9 months of 2006, ExxonMobil’s total capital and exploration expenditures were $11.65 billion. During the same period, ConocoPhillips’ spending totaled $11.51 billion.
The company that ranks twentieth in capital spending through the first 9 months of last year was Pogo Producing Co., which had total expenditures of $584 million.
There was also a wide range among the top 20 companies as ranked by stockholders’ equity. Whereas top-ranked ExxonMobil’s stockholder equity at the end of 3Q06 was $116.59 billion, twentieth-ranked Questar Corp. had $2.13 billion in stockholders’ equity.
The market capitalization of the top 20 firms as ranked by assets totaled $902.7 billion at the end of 3Q06. This is down from the preceding quarter. At the end of the second quarter of 2006, the top 20 companies’ market capitalization was a collective $907.7 billion.
Not in that previous list was Newfield Exploration Co., which moved into the current top 20 list in the absence of recently merged Kerr-McGee. For results of the second quarter of 2006, Kerr-McGee was ranked No. 13 by assets.
Fast growers
For 3Q06 Petrohawk Energy Corp. was the fastest-growing company in the OGJ200 group. Ranked No. 23 by assets, Petrohawk posted a 985% surge in earnings from the second quarter of 2006. In the same time period, the Houston-based oil and gas producer recorded a 173% gain in stockholders’ equity but took on additional long-term debt.
The fast growers are ranked according to growth in stockholders’ equity. To qualify for the list of the twenty fastest-growing companies, a member of the OGJ200 group must have recorded an increase in stockholder equity in the most recent quarter as compared to the preceding quarter.
Also, a company must have improved its earnings in the most recent quarter and must have posted positive net income for the 2 most recent quarters in order to qualify for the list.
The second company on the fast growers list is Petroleum Development Corp., based in Bridgeport, W. Va. A gain on the sale of leaseholds resulted in a net earnings increase to $211 million for 3Q06 from $7.55 million a year earlier for the company.
The third-fastest grower for 3Q06 was Parallel Petroleum Corp. Parallel grew its stockholders’ equity to $171 million from $97 million in the 3 months ended Sept. 30, 2006. For the same period, the company reported a 346% increase in net income.
The fourth-fastest growing company in 3Q06 was GMX Resources Inc., followed by W&T Offshore Inc., Cabot Oil & Gas Corp., and Carrizo Oil & Gas Inc.
Ranked No. 53 by assets, Belden & Blake Corp. was the eighth-fastest growing firm in the group during 3Q06. With a 23% climb in stockholders’ equity, the company posted a 621% jump in earnings as a result of a $50 million derivative fair value gain.
Pioneer Oil & Gas, ranked No. 123 by assets, was the eleventh-fastest grower for 3Q06. During the quarter ended Sept. 30, 2006-which is Pioneer’s fiscal yearend-the company recorded a 15% gain in stockholders’ equity and an 800% spike in net income. The large gain in earnings came as a result of the sale of property in central Utah.
