OGJ200 firms post big 3Q05 earnings gains

Of the 136 firms in this group, 74 reported improvements over their earnings in the third quarter of 2004. Meanwhile, 24 companies in the group posted a net loss for 3Q05.

And another 9 of the firms in the OGJ200 group had not yet filed their 3Q05 earnings by press time.

The OGJ200 group comprises the US-based oil and gas producers that appear in Oil & Gas Journal’s annual special report (OGJ, Sept. 19, 2005, p. 24), which ranks the publicly traded firms by year-end total assets.

Changes

A few companies that appeared in the previous edition of the OGJ200 Quarterly are no longer listed in the group as they were, due to mergers and divestitures.

Infinity Inc. merged into Infinity Energy Resources Inc. And Unocal Corp. is no longer listed, having merged with Chevron Corp.

Oneok Inc. also no longer appears in the compilation, having sold its oil and gas production companies to privately held TXOK Acquisition Inc. of Dallas for $645 million during 3Q05. The sale included oil and gas properties in Texas and Oklahoma.

Prices, margins

Natural gas futures prices on the New York Mercantile Exchange averaged $9.731/MMbtu during 3Q05, up from $5.58/MMbtu in the same 2004 quarter.

Also during the third quarter, the crude oil futures price reached its all-time high in nominal dollars on the NYMEX. On Aug. 30, the price of crude for October delivery settled at $69.81/bbl.

The average front-month futures closing price of crude during 3Q05 was $63.31/bbl, up from $43.89/bbl for the third quarter a year earlier. Similarly, the refiners’ acquisition cost of crude climbed to average $57.77/bbl for 3Q05 vs. $39.43/bbl a year earlier.

Refining margins in most of the world’s major refining centers soared in 3Q05 as compared with the same year-earlier period, according to Muse, Stancil & Co.

The largest increase was for US East Coast refining margins, which jumped to average $10.89/bbl from $3.81/bbl for the same 2004 quarter. Meanwhile, the average third quarter US Gulf Coast margin increased to $17.08/bbl from $6.56/bbl a year earlier, and on the US West Coast, the third quarter refining margin averaged $29.92/bbl, up from $12.01/bbl in the same 2004 quarter.

Results

The group’s total revenue gained 35% from the third quarter of 2004, totaling $261.7 billion. And the companies’ collective earnings reached $26.2 billion in 3Q05, up 69.4%

The OGJ200 group’s 2005 capital and exploration expenditures through the end of September were nearly unchanged from a year earlier at $57.6 billion, up from $57.4 billion in the first 9 months of 2004.

Ranked No. 1 by assets, ExxonMobil Corp. was the biggest earner for the quarter, posting net income of $9.92 billion for the 3 months ended Sept. 30, 2005. This was a 75% gain. The Irving, Tex.-based firm’s revenues were $100.7 billion for 3Q05, up 32% from a year earlier.

ExxonMobil’s upstream earnings were $5.7 billion, up $1.8 billion from the third quarter of 2004 due to higher oil and gas realizations, although production decreased almost 5% from a year earlier.

Downstream earnings gained $727 million to reach $2 billion, reflecting higher refining margins partly offset by weaker marketing margins, ExxonMobil announced. Petroleum product sales were down slightly from the prior year’s third quarter, and the company’s chemical earnings were $472 million, down $537 million from the same 2004 quarter, as increased feedstock costs reduced margins.

Reporting lower 3Q05 earnings because of Hurricanes Katrina and Rita, Dominion Exploration & Production said that about 14 bcfe of its expected oil and gas production was delayed in the quarter due to the storms. Dominion’s earnings declined 73% from a year earlier.

Newfield Exploration Co. reported a 3Q05 loss of $200,000, with a $205 million charge associated with changes in the fair market value of open three-way collar contracts, charges related to other contracts that no longer qualify for hedge accounting, and hedge ineffectiveness, offset by a $7 million gain on the sale of the Enserch Garden Banks floating production facility.

“A significant portion of our expected winter Gulf of Mexico production was hedged in various instruments. Hurricanes forced the deferral of 18-20 bcfe of our 2005 production, triggering the loss of hedge accounting for some of our winter contracts. As a result, accounting rules dictated that we take a charge on those contracts,” said David A. Trice, Newfield chairman, president and CEO.

Top 20 firms

The results of the top 20 companies as ranked by total assets in the OGJ200 were similar to the results of the entire group, with the exception of capital and exploration expenditures.

At $48 billion, these 20 firms’ capital expenditures during the first 9 months of 2005 exceeded their 2004 outlays through September by 35.5%.

The total assets of this subset of companies at the end of 3Q05 were $712.6 billion, up from $620.8 billion at year-end 2004. Meanwhile, their stockholder equity grew to $314.9 billion from $276.5 billion at the end of 2004.

The market capitalization of the top 20 firms at the end of 3Q05 was $955.8 billion, up from $818.1 at the end of June 2005, as detailed in the previous edition of the OGJ200 Quarterly (OGFJ, Nov. 2005, p. 36).

Fast growers

The fastest growing company among the OGJ200 firms during 3Q05 was Cimarex Energy Co., which also topped the fast-growers list based on results of the second quarter of 2005.

The list of fastest growing companies is determined by growth in stockholder equity. For a company to qualify for the list, it must have posted positive net income for the third quarters of 2005 and 2004, and it must have increased its earnings in the most recent quarter as compared with the year-ago quarter. Limited partnerships, newly public companies and subsidiaries are excluded from this list.

Cimarex reported that its stockholder equity gained 246% by the end of 3Q05 from a year earlier, and its net income grew 64%.

The second company on the fast-growers list, Noble Energy Inc., also held that position the prior quarter. At $177,000, Noble’s earnings jumped 112% as compared with the third quarter of 2004, while its stockholder equity gained 90%.

Ten other firms on the list of fast growers were also on the list based on results of the second quarter of 2005. These include Ultra Petroleum, XTO Energy Inc., W&T Offshore Inc., Panhandle Royalty Co., and Chesapeake Energy Corp., as well as Occidental Petroleum Corp., Marathon Oil Corp., Parallel Petroleum Corp., Remington Oil & Gas Corp., and GeoResources Inc.

The third fastest grower for 3Q05 is PrimeEnergy Corp. The Stamford, Conn. firm posted an 85% increase in stockholder equity, and its earnings soared 711% from the same 2004 quarter. At the same time, PrimeEnergy cut its long-term debt to $8.3 million from $30 million.

NGAS Resources Inc. ranks as the seventh fastest grower, posting earnings of $187,000, up from $17,000 and growing its stockholder equity 39% while shrinking its debt 70%.

The twentieth company among the fastest growers is Murphy Oil Corp., which posted a 25% increase in stockholder equity. Murphy’s earnings were up 95% in 3Q05 from a year earlier on higher oil and gas sales prices, higher oil sales volumes, lower dry hole costs, and business interruption insurance recoveries of $4.9 million after taxes related to prior-year hurricanes.

Murphy said that these gains were partly offset by lower natural gas sales volumes, higher hurricane-related costs in 2005 ($11.6 million in 2005 vs. $2.6 million in 2004), and an after-tax gain of $24.6 million in the third quarter of 2004 from sale of “T” Block field in the UK North Sea.

Also during 3Q05, Murphy’s refining and marketing operations generated net income of $32 million, compared to earnings of $18.7 million in the 2004 quarter. The earnings improved due to higher profits in the UK, partially offset by lower profits in North America.$

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