Third quarter income jumps 66% from 2Q08, up 112% from 3Q07
Financial results for the 156 publicly-traded US producers tracked in the OGJ200 report continued to rise in the 3Q08 as the economic malaise that had begun to grip the country earlier in the year had not yet trickled down to the oil and gas sector. Oil prices had peaked in July and started a long, steep decline afterwards, but the petroleum sector was still doing well despite falling prices and declining demand.
For the third quarter of 2008, net income rose a whopping 66% compared to the prior quarter and showed an even more dramatic increase of 112% compared to the same period in 2007. Total revenues exhibited a modest 3% increase over the second quarter of 2007. However, the improvement in revenues from 3Q07 to 3Q08 was a healthy 46%.
Capital spending by the OGJ200 companies also showed significant increases — up 32% over the same period in 2007 and up 56% over the prior quarter.
Total assets by these companies rose only 0.7% for the quarter but were up nearly 12% over the 3Q07.
Stockholders’ equity was up 9% for the quarter and almost 14% over the previous year.
Looking at the top 20 companies (as ranked by assets), net income increased by $4.8 billion to just over $48 billion — a 14.5% increase over the second quarter and a 106% increase over the same quarter in 2007. Revenues marginally increased by almost $8.7 billion to $373 billion, reflecting a 2.4% gain over second-quarter revenues, but a 45% jump over the prior year.
Capital spending for the top 20 companies rose significantly to $82.6 billion — up 46% over the second quarter and 28% over the same period in 2007. Total assets fell by 21% from the previous reporting period, but assets were still up by 10.3% over the 3Q07. Stockholders’ equity increased 5.8% for the quarter and slightly more than 12% over the prior year.
By the way, here are some numbers we haven’t posted before. Third-quarter financial reports reflect that the top 20 companies clearly dominate both revenue and income among publicly-traded US producers reporting here. The top 20 in total revenues have a 96.2% market share compared with just 3.8% for the remaining companies. In total income, the top 20 are nearly as dominant with a 90.2% market share compared with 9.8% for the rest.
The 20 largest companies in total assets have 86% of the OGJ200 total in this category, and they have 88.7% of the total in stockholders’ equity. In capital spending, the differences are slightly less dramatic — the top 20 companies spent roughly 70% of the total, while the remaining 130 or so companies spent 30% of the total in this category.
The OGJ200 group of companies consists of publicly-traded, US-based 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 156 firms, up by 10 from the 146 companies listed in the previous edition of the OGJ200 Quarterly Report, published in the November 2008 issue of Oil & Gas Financial Journal. The financial results of several of the firms were not available for this issue of the report, as these companies had not filed their third-quarter results with the US Securities & Exchange Commission by press time.
Largest producers
For the third quarter of 2008, the 20 largest companies in terms of revenue did not change substantially over the prior quarter. The six largest companies in this category remained the same — 1) ExxonMobil Corp.; 2) Chevron Corp.; 3) ConocoPhillips; 4) Marathon Oil Corp.; 5) Hess Corp.; and 6) Murphy Oil Corp. Moving up to the seventh position this quarter is Chesapeake Energy Corp., which had fallen from the top ranks in the second quarter. Rounding out the top 10 producers in terms of revenue are 8) Occidental Petroleum Corp.; 9) Anadarko Petroleum Corp.; and 10) Devon Energy Corp.
The second 10 in this category are 11) Apache Corp.; 12) EOG Resources Inc.; 13) XTO Energy Inc.; and 14) El Paso Corp. Exco Resources Inc. is a newcomer to the top revenue producers in the fifthteenth position. The remaining companies are 16) Noble Energy Corp.; 17) Dominion Energy Inc.; 18) Williams Cos. Inc.; 19) Questar Corp.; and 20) Plains Exploration & Production Co. Two companies fell from the top 20 rankings — Newfield Exploration and Pioneer Natural Resources Co.
There were a few more changes than usual in the third quarter in the top 20 rankings of companies according to net income. The top three remained the same — 1) ExxonMobil Corp.; 2) Chevron Corp.; and 3) ConocoPhillips. However, Chesapeake Energy moved up to the No. 4 slot, followed by 5) Devon Energy; 6) Occidental Petroleum; 7) Anadarko Petroleum; 8) Marathon Oil; 9) EOG Resources; and 10) Apache Corp.
The remaining companies are 11) Noble Energy; 12) Hess Corp.; 13) Newfield Exploration; 14) Murphy Oil; 15) XTO Energy; 16) Plains Exploration & Production; 17) El Paso Corp.; 18) Forest Oil Corp.; 19) Williams Cos. Inc.; and 20) Petrohawk Energy Corp. Dropping out of this quarter’s top 20 in net income are Contango Oil & Gas Co., Cimarex Energy Co., Kinder Morgan CO2 Co. LP, Questar, Pioneer Natural Resources Co., and Southwestern Energy Co.
Market capitalization for the top 20 companies in terms of assets fell by nearly $131 billion, representing about an 11% decline over the second quarter. ExxonMobil, the leader in this category, grew its market cap by nearly $13 billion. The only other companies in this category that reported a growth in market capitalization are Marathon Oil Corp. (up nearly $3.6 billion); XTO Energy (up a little more than $622 million); and Dominion Energy (up nearly $11.5 billion).
Big spenders
Capital spending was up — way up — among the top 20 producers in this category on the OGJ200 report. In fact, total spending by these companies rose by nearly $33 billion to slightly more than $89 billion, representing a whopping 58% increase for the year to date. All the companies on the top 20 list in spending remained the same as the last quarter except for Forest Oil Corp., which joined the ranking in the No. 16 position. Falling out of the top 20 in spending is Exco Resources.
The top five companies in capital spending are 1) ExxonMobil; 2) Chevron Corp.; 3) ConocoPhillips; 4) Devon Energy; and 5) Marathon Oil. Together, these five companies have spent roughly $50 billion YTD, which is more than the next 15 biggest spenders combined. As mentioned previously, the top 20 companies in capital expenditures account for approximately 70% of total domestic (US) capex spending for publicly-traded US-based oil and gas producers.
Fast-growing firms
Denver-based Berry Petroleum Co. is the winner among the 20 fastest-growing companies on the OGJ200 third-quarter report with a significant 107.3% growth in stockholder equity. The firm more than doubled its stockholder value with a $309 million increase to $597 million in the third quarter over the prior quarter.
Berry Petroleum earned net income of $53.3 million, or $1.17 per diluted share, for the three months ended Sept. 30, 2008, up 98% from net income of $26.9 million, or $.60 per diluted share in the third quarter of 2007, according to Robert F. Heinemann, president and CEO. Discretionary cash flow totaled $122 million in the quarter, up 70% from $72 million in the third quarter of 2007.
For the third quarter, net production averaged 35,150 barrels of oil equivalent per day (boe/d), an increase of 31% from the 26,873 boe/d achieved in the same 2007 period. The average realized sales price, net of hedging, for the 2008 third quarter was $64.98 per boe, up 36% over the $47.93 per boe received in the 2007 period. Oil and gas revenues rose 75% to $208 million in 2008 compared to $119 million in 2007. The company drilled 118 gross (101 net) wells in the third quarter of 2008.
Other fast-growing firms included St. Mary Land & Exploration Co., also based in Denver, which grew at an 86.75% rate from the second to the third quarter of 2008, and Houston-based Southwestern Energy, which grew at a 51.8% rate over the same period. St. Mary was founded in 1908 and celebrated its 100th anniversary last year.
Tony Best, St. Mary’s president and CEO, commented, “Financial turmoil has caused issues for many companies in our sector. I am pleased with how well St. Mary has weathered these events. We finished the quarter well capitalized with dry powder available to us to pursue future opportunities.”
Harold M. Korell, CEO of Southwestern, noted, “At the end of the quarter, we had over $425 million of cash and cash equivalents on hand, had reduced our debt-to-total capitalization ratio to 25% down from 37% at the end of 2007, and our $1 billion unsecured credit facility was completely undrawn. We expect to end the year with one of the strongest balance sheets in our history.”
Click here to download a .pdf of the Quarter ending Sept. 30, 2008