OGJ200 Report
Prices spur OGJ200 group’s 2Q06 results as spending remains strong
Marilyn Radler, Senior Editor - Economics, Oil & Gas Journal
Laura Bell, Statistics Editor, Oil & Gas Journal
The combined earnings of the OGJ200 group of companies surged in the second quarter of 2006 (2Q06), up 36% from the second quarter of last year. Most of the firms’ earnings gains were the result of strong oil and gas prices and production volumes, as demand for petroleum products, especially transportation fuels, was robust.
The OGJ200 group comprises the US-based oil and gas producers that appear in Oil & Gas Journal’s most recent annual special report, which ranks the publicly traded firms by yearend assets (OGJ, Sept. 4, 2006, p. 20).
Changes
There have been some changes to the list of firms since the previous edition of the OGFJ200 Quarterly (OGFJ, August 2006, p. 51). Oil & Gas Journal’s latest OGJ200 report details the 2005 results of 138 firms. With the exception of Burlington Resources Inc., which ConocoPhillips acquired earlier this year, those same firms appear in this edition of the OGFJ200 Quarterly.
No longer in this quarterly compilation are Natural Gas Systems Inc., which merged with Evolution Petroleum Corp., and KCS Energy Inc., which merged into Petrohawk Energy Corp.
New to the quarterly report is Aurora Oil & Gas Corp., formerly Cadence Resources Corp., based in Traverse City, Mich. Aurora Oil & Gas is ranked No. 74 in the group with total assets at the end of 2Q06 of $169.5 million.
The financial results of eight of the firms that qualified for the list are not included in this quarterly report, as they were not yet filed with the US Securities & Exchange Commission by press time.
Results
The OGJ200 group posted 2Q06 collective net income of $29.4 billion. Revenues totaling $257 billion were up 14% from a year earlier, buoyed by market prices and production volumes.
The combined earnings of top-ranked ExxonMobil Corp., No. 2 ConocoPhillips, and No. 3 Chevron Corp. accounted for almost 68% of the entire group’s net income.
During 2Q06 the average price of West Texas Intermediate crude oil was $67.63/bbl. A year earlier, the average was $49.81/bbl. For the recent quarter, the average US wellhead price of natural gas was nearly unchanged from a year earlier, averaging $6.193/MMcf.
Gasoline prices during 2Q06 were up sharply from a year earlier, as well. The average pump price for all grades of unleaded gasoline was up 30% from the second quarter of 2005, according to the US Energy Information Administration.
EIA figures also show that motor gasoline demand climbed in the recent quarter, despite higher retail prices brought on by an increase in the use of ethanol and the switch to summer-grade fuel.
Demand for gasoline averaged 9.297 million b/d, up from 9.256 million b/d a year earlier, and refining margins moved higher during 2Q06. The US Gulf Coast cash refining margin averaged $18.39/bbl, up from $10.87/bbl a year earlier, according to Muse, Stancil & Co.
From the end of 2005, the collective stockholders’ equity of the 129 companies for which results were available grew 16%. The biggest surge in results was for capital outlays. The OGJ200 firms’ capital expenditures in the first half of 2006 climbed 52% from the same period a year earlier.
Total assets for the group at the end of 2Q06 amounted to $885 billion, up from $782 billion at yearend 2005.
Although overall results for the group are strong, there are 26 firms among the 129 that posted a loss for 2Q06. For the second quarter of last year, 34 companies in the current OGJ200 group recorded a loss.
Noble Energy Inc., ranked No. 15 by assets, was the highest-ranked company to post a loss for 2Q06. Noble Energy reported a loss of $30.7 million compared to earnings of $137 million a year earlier.
Noble Energy reported an after tax loss of $250 million related to cash flow hedges associated with the sale of its Gulf of Mexico shelf assets and said that without this, its 2Q06 earnings would have been $219.3 million. The company’s revenue for the quarter was $772.6 million, up from $485.4 million a year earlier.
Adams Resources & Energy Inc. posted one of the largest year-on-year gains in the group, growing net income 555% to $7.8 million for the quarter. Adams attributes the gain to increased oil and natural gas price realizations. Adams’ average 2Q06 crude oil prices increased 35% to $67.88/bbl, while average natural gas prices rose 4% to $7.27/MMcf.
Top 20
The top 20 firms in the OGJ200 group as ranked by assets account for 97% of the revenue for the entire group and 95% of total earnings.
In addition, these 20 companies hold nearly 92% of the group’s total assets and almost 93% of total stockholders’ equity. But their capital expenditures for the first 6 months of 2006 account for 83% of the entire group’s outlays.
The market capitalization of the top 20 firms as of June 30, 2006, was $907.7 billion. This compares to a total of $880 billion for the top 20 firms in the previous edition of the OGJ200 Quarterly. The same companies comprise the top 20 in this edition as in the previous edition of the report.
The OGJ200 Quarterly also ranks the companies by earnings. The top three firms as ranked by assets are also the top 3 earners for 2Q06. No. 6 by assets, Marathon Corp. posted the fourth biggest earnings of the OGJ200 group with $1.7 billion in net income.
XTO Energy Inc., ranked at No. 14 by assets, was the ninth highest earner, reporting $597 million in net income for the quarter. And with $361.9 million in net income for 2Q06, No. 20 Pogo Producing Co. was the eleventh highest earner.
Fast-growing firms
Ranked No. 84 by assets, Arena Resources Inc. was the fastest-growing company in the OGJ200 group during 2Q06. This Tulsa-based oil and gas producer grew its stockholder equity 80% from the end of 2005.
For the recent quarter, Arena Resources posted a 276% spike in earnings as compared with the second quarter of 2005. Additionally, the company remained free of long-term debt.
The 20 fastest-growing companies are determined primarily by growth in stockholder equity. For a company to qualify for this list, it must have reported positive net income for the second quarters of 2006 and 2005, and it must have recorded an earnings increase in the most recent quarter vs. the corresponding year-earlier period. Excluded from this list are limited partnerships, subsidiaries, and companies that went public since the beginning of 2005.
Range Resources Corp. was the second-fastest grower for the quarter. Range Resources, which also appeared among the fast growers for the first quarter of 2006, reported a 56% boost in stockholder equity since yearend 2005 and a 137% increase in 2Q06 net income from a year earlier.
ConocoPhillips, Chesapeake Energy Corp., and Delta Petroleum Corp. are the third, fourth, and fifth fastest growers respectively. These three companies also were on the list of fastest growing firms in the previous edition of the OGJ200 Quarterly.
With headquarters in Denver, American Oil & Gas Inc. is the ninth company among the fast growers. Ranked No. 95 by assets, American Oil & Gas reported 2Q06 net income of $2.36 million, up from $159,000 a year earlier. Meanwhile, the company’s stockholder equity gained 28% in the first half of this year.
American’s projects and properties are located in the western US, with the majority of its activity centered in the Rocky Mountain region. The company began oil and gas operations in January 2003, with the purchase of oil and gas leasehold interests in several properties from Tower Colombia Corp. and North Finn, LLC, two private E&P companies. In April of 2005, Tower was merged into American.
Included in American’s net income for 2Q06 is a gain of $3 million (about $1.8 million net of tax) from the sale of its Bear Creek project and the sale of a partial interest in its Goliath project. Also included in net income for the quarter is service fee income of $1.5 million. The service fee income relates to a finder’s fee received for assisting another oil and gas company in acquiring leases that did not fit well within American’s acreage portfolio, the company reported.