Earnings rocket for OGJ200 firms

April 1, 2005
Buoyed by stronger oil and gas prices as compared to the same period a year earlier, the firms in the OGJ200 group of US energy companies posted a nearly 50 percent surge in net income for the third quarter of last year (3Q04).

Buoyed by stronger oil and gas prices as compared to the same period a year earlier, the firms in the OGJ200 group of US energy companies posted a nearly 50 percent surge in net income for the third quarter of last year (3Q04).

Additionally, the group of publicly traded firms recorded a strong gain in revenues for 3Q04, and year-to-date capital and exploration expenditures showed further strength as compared with full-year 2003 spending.

This quarterly list of companies includes those firms that appear in Oil & Gas Journal’s annual OGJ200 special report (OGJ, Sept. 13, 2004, p. 28), which primarily ranks firms by their year-end assets. This edition of the OGFJ quarterly report contains 138 publicly traded US oil and natural gas producing companies, whereas the previous quarterly review contained 140 such firms.

Click here to view the full report with analysis in PDF.

Two of the firms’ 3Q04 results are not included in this report because, as of press time, they had not been reported to the US Securities & Exchange Commission.

Another two companies are no longer listed in this quarterly report. Evergreen Resources Inc. merged with Pioneer Natural Resources Co. last year, and CLX Energy Inc., is now a private entity.

Market forces

During 3Q04, oil prices built toward a peak in October. The near-month futures price of oil on the New York Mercantile Exchange averaged $40.81/bbl in July, $44.88/bbl in August, and $45.94/bbl in September.

Meanwhile, natural gas futures prices retreated. For gas, the near-month futures price averaged $6.053/MMbtu in July, then dipped to average $5.472/MMbtu in August, and $5.22/MMbtu in September.

Improved refining margins in all of the major refining centers helped boost the earnings of the integrated firms in the group. The US Gulf Coast cash refining margin averaged $6.56/bbl during 3Q04, up from $3.67/bbl in the same 2003 period, according to Muse, Stancil & Co.

The US East Coast margin increased less dramatically, averaging $3.81/bbl vs. $3.47/bbl in the same 2003 quarter, but the US West Coast margin jumped to average $12.01/bbl in 3Q04 from $6.86/bbl a year earlier. Margins realized substantial gains in Northwest Europe and Southeast Asia, as well.

Financial results

Collectively, the 138 firms in this edition of the OGJ200 Quarterly reported 3Q04 net income of $15.8 billion, up from $10.7 billion for the third quarter of 2003.

Comparing the same time periods, the group grew revenues to $193.6 billion from $151.1 billion. And through the third quarter, the group’s year-to-date capital and exploration expenditures grew to nearly reach their total 2003 spending. Full-year 2003 spending by the group was $48 billion, but through the third quarter, 2004 spending reached $42 billion.

The top-ranked company in the OGJ200 group, ExxonMobil Corp., reported third-quarter net income of $5.7 billion, up $2 billion from the third quarter of 2003. Revenues totaled $76.4 billion, up from $59.8 billion in the same 2003 quarter. Capital and exploration expenditures of $3,634 million during 3Q04 were down $204 million compared with a year earlier.

Upstream earnings were more than three times higher due to higher average crude and natural gas prices, and ExxonMobil’s production on an oil-equivalent basis increased one percent versus third quarter 2003. Downstream earnings were up on improved worldwide refining conditions, despite continued weakness in marketing margins. Chemical earnings, which benefited from higher worldwide margins and record sales volumes, were a record $1 billion, up $779 million from third quarter 2003 results.

While other large integrated firms in the group, such as ChevronTexaco Corp., ConocoPhillips, and Occidental Petroleum Corp. also posted healthy earnings gains for 3Q04, Marathon Oil Corp. incurred a 21 percent decline in earnings.

Marathon said that its earnings were lower due to a number of factors, including the effect of hurricanes in the US Gulf of Mexico and unplanned downtime on oil and gas production.

Marathon reported that its 3Q04 net income adjusted for special items was slightly higher than in the same period of 2003, mostly as a result of higher oil and gas prices. But partially offsetting the higher prices were reduced oil and gas production levels due to divestitures, normal field declines, and downtime related to hurricanes and maintenance.

Increased production and stronger prices were also behind the earnings growth of the independent oil and gas producers in the OGJ200 group.

Swift Energy Co., which ranks at No. 44 by assets, reported that its 3Q04 earnings doubled from a year earlier on a two percent increase in production.

The improved earnings results came in spite of an 11 percent increase in oil and gas production costs during the quarter. Swift said that it incurred these higher costs due to facility repairs in its Lake Washington production area in Louisiana, along with higher currency exchange rates and plant maintenance costs in New Zealand.

During 3Q04, Swift realized an aggregate global average price of $5.36/Mcfe. This is a 40 percent increase from the same 2003 quarter.

Top 20 firms

The 20 firms at the top of the OGJ200 list as ranked by assets account for 96 percent of the revenues earned by the entire group during 3Q04. These 20 companies also took in 92 percent of the group’s total earnings for the period. However, they only spent 83 percent of the entire group’s capital and exploration expenditures through the first nine months of the year.

The market capitalization of the top 20 firms at the end of September 2004 was $680 billion, up from a market cap of $617 billion for the companies that ranked highest in terms of assets at the end of June 2004.

This report also ranks the 138 firms by 3Q04 revenues, net income, and spending. Not surprisingly, the same three firms-ExxonMobil, ConocoPhillips, and ChevronTexaco-are among the top three in each of these sets of rankings.

The only company to make a big jump from its assets ranking to the revenue leaders table is Murphy Oil Corp. Murphy ranks at No. 18 in terms of assets, but posted revenue of $2.3 billion during 3Q04. This puts Murphy at No. 7 on the table that ranks the top 20 in quarterly revenue.

On the table that ranks the firms by net income, Apache Corp. is No. 6 with 3Q04 earnings of $433.7 million. Ranked by assets, Apache is No. 11 in the OGJ200.

And EOG Resources Inc., which ranks by assets at No. 20, posted the twelfth highest earnings of the entire group during the quarter. EOG also ranks at No. 13 among the leaders in capital spending through the first nine months of 2004.

Fast growers

Eleven of the firms on the latest list of fast growers appeared on the previous fastest growers list as well.

This list of the 20 fastest-growing companies ranks firms based on growth in stockholder equity. For a company to appear on this list, it must have posted positive net income during the third quarters of 2003 and 2004. It also must have increased its net income during the most recent quarter. Excluded from the list are limited partnerships, newly public companies, and subsidiaries.

Leading the list for 3Q04 results is Chesapeake Energy Corp. Chesapeake, with headquarters in Oklahoma City, increased its stockholder equity 63 percent from the end of 2003, and its earnings increased 10 percent from the third quarter of 2003. But, Chesapeake’s long-term debt grew to $2.8 billion from $2.1 billion a year earlier.

The second fastest-growing company during 3Q04 was Meridian Resources Corp., which saw its earnings soar 83 percent from the third quarter of 2003. Meridian’s long-term debt declined to $74 million from $122 million, and its stockholder equity grew 62 percent from year-end 2003.

Following Meridian on the list of fastest growers are Trek Resources Inc., XTO Energy Inc., Toreador Resources Inc., and Magnum Hunter Resources Inc. All of these top six firms also appeared on the list based on their results from the second quarter of 2004.

Not on the previous list is Pioneer Oil & Gas, with headquarters in South Jordan, NJ. Pioneer saw its stockholder equity grow 48 percent from the end of 2003, and its net income grew to $248,000 for 3Q04 from $15,000 a year earlier.

Texas Vanguard Oil Co., which is ranked at No. 126 by assets, also appears as one of the 20 fastest growers. The Austin-based company posted 3Q04 net income of $384,000, up 225 percent from a year earlier, and its stockholder equity grew to $3.2 million at the end of the quarter vs. $2.6 million at the end of 2003. OGFJ