2Q08 revenues very strong; net income increases 6.5%

As we know, commodity prices are a significant factor in revenue generation as well as profitability. Operating costs must also be factored in. To keep second-quarter financials in context, we must remember that commodity prices were soaring to record levels during the first half of the year, particularly the second quarter. Crude oil peaked at about $147/barrel in early July. The downward spiral began during the third quarter with oil prices plummeting to $66 by mid October – an $81 drop in about three months.

In addition, the general economic woes and reduced availability of credit have caused companies to cut back their drilling budgets and capital expenditures. Much of this will undoubtedly be reflected in year-end statements when they come out. Several firms contacted by Oil & Gas Financial Journal say they plan to keep their capital spending budget flat for 2009, including some of the Super Majors like ConocoPhillips.

The OGJ200 group of companies consists of publicly-traded, US-based oil and gas producers. The group appears in the Oil & Gas Journal’s annual special report, which ranks the firms by year-end total assets. To qualify for the list, a company must have operations in the United States.

Firms not reporting

The group includes 146 firms, up by nine from the 137 companies listed in the previous edition of the OGJ200 Quarterly, published in the August issue of Oil & Gas Financial Journal. The financial results of four of the firms were not available for this edition of the report, as these companies had not filed their second-quarter results with the US Securities & Exchange Commission by press time.

Largest producers

For the second quarter, nearly all the largest publicly-traded companies tracked by PennWell showed substantial increases in both revenues and profits. Of the top 20 companies in total revenue, there was an overall increase of $63.6 billion, representing a 21% increase over the previous quarter. Of the top 20 in net income, overall profits rose by $4.8 billion, a 17% improvement over the previous quarter.

In terms of total revenue, the 10 largest producers didn’t change much from the first quarter to the second. Anadarko Petroleum ($2.8 billion), previously in the ninth position, switched places with Devon Energy ($3.5 billion), formerly in the 10th slot. Positions one through eight are: ExxonMobil ($138 billion), Chevron ($83 billion), ConocoPhillips ($73 billion), Marathon Oil ($22 billion), Hess Corp. ($12 billion), Murphy Oil ($8.4 billion), Occidental Petroleum ($7.2 billion), and Apache Corp. ($3.9 billion).

The next 10 in total revenue are XTO Energy ($1.9 billion), Noble Energy ($1.2 billion), El Paso Corp. ($1.2 billion), EOG Resources ($1 billion), Williams Cos. ($976 million), Dominion Energy ($894 million), Questar Corp. ($866 million), Plains Exploration & Production ($734 million), Newfield Exploration ($691 million), and Pioneer Natural Resources ($666 million).

With regard to net income, the top 10 producers are ExxonMobil ($11.7 billion), Chevron ($6 billion), ConocoPhillips ($5.4 billion), Occidental ($2.3 billion), Apache ($1.4 billion), Devon ($1.3 billion), Hess Corp. ($900 million), Marathon ($774 million), Murphy Oil ($619 million), and XTO Energy ($575 million).

Rounding out the top 20 in net income are Williams Cos. ($490 million), Contango Oil & Gas ($257 million), Cimarex Energy ($229 million), Kinder Morgan CO2 Co. LP ($217 million), Plains E&P ($203 million), El Paso Corp. ($191 million), EOG Resources ($178 million), Questar ($173 million), Pioneer Natural Resources ($159 million), and Southwestern Energy ($137 million).

Market capitalization of the 20 largest companies rose by $158 billion from the first quarter of 2008 to the second quarter – roughly a 13.5% increase.

Market capitalization of the top 20 producers in terms of assets are as follows: ExxonMobil ($458 billion); Chevron ($204 billion); ConocoPhillips ($143 billion); Occidental ($73 billion); Devon ($53 billion); Apache ($46 billion); Hess ($41 billion); Marathon ($37 billion); Chesapeake Energy ($36 billion); and Anadarko ($35 billion).

The next 10 in market capitalization are XTO Energy ($35 billion); EOG Resources ($33 billion); Dominion Energy ($28 billion); Williams Cos. ($23 billion); Murphy Oil ($19 billion); Noble Energy ($17 billion); El Paso Corp. ($15 billion); Pioneer Natural Resources ($9.3 billion); Newfield Exploration ($8.6 billion); and Plains E&P ($7.8 billion).

Results

Fifty-one of the firms in the compilation reported a net loss of income for the second quarter of 2008 – up by 12 from the previous quarter. Among the larger companies that reported losses are Chesapeake Energy (-$1.6 billion), Noble Energy (-$144 million), Newfield Exploration (-$244 million), Exco Resources (-$263 million), Forest Oil Corp. (-$68 million), and Petrohawk Energy (-$93 million).

Thirteen of the top 20 companies (ranked by assets) showed an increase in net income over the 1Q08. They are ExxonMobil (up 7%); ConocoPhillips (up 31%); Chevron (up 34%); Marathon (up 6%); Devon (up 74%); Occidental (up 24%); Apache (up 41%); Hess (up 19%); XTO (up 24%); Murphy (up 51%); Williams (up 14%); Pioneer (up 22%); and Plains E&P (up 24%).

Of this elite group, ConocoPhillips showed the largest numerical increase in net income – up $1.3 billion over its first quarter numbers. Devon, with the largest percentage increase (74%), grew its net income by $558 million to $1.3 billion in the second quarter. ExxonMobil had the largest net income for the entire group -- $11.7 billion.

Top spenders

ExxonMobil overtook Chevron as the top-ranked company in capital, exploratory spending. Chevron falls to second place. ExxonMobil’s year-to-date capex was $9.5 billion, including $5.2 billion for the just-completed second quarter. Chevron’s YTD capex was $9.0 billion, including $4.5 billion in the second quarter. Coming in a strong third, ConocoPhillips spent a little over $6.7 billion for the first six months of 2008, including $3.4 billion in the second quarter.

Fourth-place Devon’s capex was up $2 billion in the second quarter and its six-month total came to $3.9 billion. Houston-based Marathon Oil’s six-month expenditures totaled $3.4 billion, up more than $1.8 billion from the first quarter.

Chesapeake’s spending rose $1.5 billion in 2Q08 compared with $1.4 billion the first quarter. Apache YTD spending exceeded $2.5 billion for the first six months of 2008, up nearly $1.4 billion from the first quarter.

Rounding out the top 10 companies in spending, Anadarko’s six-month total was $2.2 billion, up about $1.2 billion from 1Q08; EOG Resources spent almost $1.1 billion in the second quarter and about the same amount in the first quarter; and Hess moved into the top 10 in spending with a total of $2 billion in capex for the first six months, up nearly $1.2 billion from 1Q08.

Fast growing firms

Arena Resources, which was profiled in the May 2008 issue of Oil & Gas Financial Journal, topped the list of fastest-growing companies in the second quarter with a 50.5% increase in stockholders’ equity. The Tulsa-based company’s primary focus is in the Permian Basin of West Texas and eastern New Mexico. The company showed a 35.4% increase in net income for the quarter, and is currently ranked No. 75 on the OGJ20 Quarterly, according to assets.

Other fast growers are Pioneer Oil & Gas (up 45%); Credo Petroleum Corp. (up 44.4%); McMoran Exploration Co. (up 33.8%); Apache Offshore Investment Partnership (up 23.2%); and Cabot Oil & Gas Corp. (up 22.1%).

Houston-based Contango Oil & Gas, last quarter’s fastest-growing company according to stockholders’ equity, fell to 58th place in the second quarter.

Click here to download a .pdf of the Quarter ending June 30, 2008