OGJ200 group’s earnings, capital spending soar in 1Q06
Marilyn Radler, Senior Editor - Economics, Oil & Gas JournalLaura Bell, Statistics Editor, Oil & Gas Journal
Higher oil and gas prices propelled the earnings as well as the capital spending of the OGJ200 group of companies in the first 3 months of 2006. Many of the firms also recorded increased production volumes as compared with the same year-earlier period.
Revenue and net income for the group during the first quarter (1Q06) posted considerable gains vs. the same quarter a year earlier.
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. 19, 2005, p. 24).
The results of 122 companies are included in this edition of the OGJ200 Quarterly, showing a collective 36% jump in net income and a 22% gain in revenues for 1Q06.
Changes
Burlington Resources Inc. no longer appears in this compilation, having been acquired by ConocoPhillips. The transaction closed at the end of 1Q06.
ConocoPhillips’ acquisition of Burlington Resources boosted the company’s ranking to the No. 2 spot in terms of assets, ahead of now No. 3 Chevron Corp. At the end of 1Q06, ConocoPhillips’ assets totaled $160 billion, while Chevron’s assets stood at $128 billion.
Also, Amerada Hess Corp. changed its name to Hess Corp.
Results of ten of the OGJ200 companies, such as Pioneer Oil & Gas, Quest Resources Inc., and Ness Energy International Inc., were not yet available at press time and are not included in this quarterly report.
Results
With $216 billion in assets, ExxonMobil remains the No. 1 firm in the group.
The collective assets of the 122 companies in the OGJ200 at the end of the quarter were up 10% from the end of 2005, totaling $859 billion. The group’s collective stockholder equity grew to $390 billion from $356 billion at year-end 2005.
The biggest year-on-year gain was in the group’s capital and exploration outlays. The 1Q06 capital and exploration expenditures of the OGJ200 firms were up 68% from a year earlier, totaling $25.5 billion.
Wellhead prices for oil and gas were up sharply from the first quarter of 2005. The average US wellhead price of crude oil during 1Q06 was up 31% from a year earlier, while the wellhead price of natural gas was up 35% for the same period.
US cash refining margins were generally higher in 1Q06 as compared with the same 2005 quarter, according to Muse, Stancil, & Co. The West Coast margin gained the most, up 54% from a year earlier, while the East Coast margin declined 10%.
Ranked at No.11, Chesapeake Energy Corp. recorded a 399% surge in quarterly earnings for 1Q06. Higher realized prices and increased production volumes of oil and gas spurred the gain.
Chesapeake’s daily production for 1Q06 averaged 1.519 bcfe, a 31% increase from the 2005 first quarter. Of this, 42% was generated from organic drillbit growth, and 58% was generated from acquisitions.
The Oklahoma City-based company’s average realized natural gas price for the recent quarter was $9.61/MMcf, up from $8.08/MMcf a year earlier. Chesapeake’s averaged realized oil price was $57.12/bbl, up from $52.65/bbl in the first 3 months of 2005. These prices include the effects of realized gains or losses from hedging.
Also reporting increased production and prices for the quarter, Carrizo Oil & Gas Inc. posted $6.65 million in net income, up from $482,000 in the first 2005 quarter.
Chevron reported a 49% gain in earnings on a 31% climb in revenue. Jacques Rousseau, analyst with Friedman Billings Ramsey & Co. Inc. said, “Operating earnings of $3.5 billion were in line with our forecast and well above 1Q05’s $2.4 billion, largely driven by last year’s Unocal acquisition and higher commodity prices.”
Concerning Chevron’s downstream earnings, Rousseau said, “Operating earnings of $580 million were consistent with our expectations. Total throughput averaged 2 million b/d, an 8% year-over-year increase. Chemicals earnings totaled $153 million, slightly above our forecast.”
Despite a 21% increase in revenue from the first quarter of 2005, Kerr-McGee Corp. recorded a 28% decline in net income for 1Q06. This reflects a 1Q05 gain from discontinued operations of $112 million. Such a gain was not realized in the recent quarter.
Top 20 firms
At the end of 1Q06, the top 20 firms in the OGJ200 group had a total of $788.7 billion in assets, controlling 92% of the assets of the entire group.
And during the first quarter, these 20 companies’ capital and exploration expenditures accounted for 82% of the entire group’s outlays. Up 67% from the first quarter of 2005, the capital and exploration spending of the top 20 firms totaled $21 billion.
With Burlington Resources no longer listed in the group, Pogo Producing Co. enters the top 20. Ranked at No. 20, Pogo’s assets at the end of 1Q06 were $5.67 billion. The other firms currently ranked among the top 20 were also in this top group at the end of 2005.
The market capitalization of the top 20 group of firms at the close of 1Q06 was $880 billion. This compares to a collective market cap of $853 billion for the top 20 firms as of Dec. 31, 2005.
And the top 20 firms’ collective stockholder equity climbed 10% to $361.5 billion from the final 2005 quarter.
Fast growers
For 1Q06 ConocoPhillips was the fastest growing company in the OGJ200. The Houston-based firm’s stockholder equity grew 37% during the quarter, and its net income increased 13% from a year earlier.
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 first quarters of 2006 and 2005, and it must have grown its earnings 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 first quarter of 2005.
With a 33% gain in stockholder equity, Pioneer Natural Resources Co. was the second fastest-growing company for the quarter.
Ranked No. 8 by assets, Pioneer reported net income of $543 million compared to net income for the same 2005 quarter of $85 million. The Dallas company reported that net income for 1Q06 included an after-tax gain on the disposition of deepwater Gulf of Mexico assets of $472 million and other unusual items.
The third and fourth fastest growers, GMX Resources Inc. and Delta Petroleum Corp., also appeared on the fast growers list based on results of the final 2005 quarter (OGFJ, May 2006, p. 43).
KCS Energy Inc., ranked at No. 53, was the fifth fastest grower. Along with an 85% increase in net income from a year earlier, KCS Energy’s stockholder equity grew 21% in 1Q06. The company reported that its net daily production during the recent quarter, after production payment delivery obligations that don’t contribute to cash flow, increased 35% from a year earlier.
The sixth company among the fast growers is Panhandle Royalty Co. This Oklahoma City company grew its stockholder equity 20% by the end of the recent quarter from the end of 2005.
Panhandle Royalty’s net income increased 68% on stronger oil and gas prices. The company’s average sales price for oil during the quarter was $61.45/bbl, up from $48.45/bbl a year earlier, and its average sales price for gas was $6.68/MMcf, up from $5.29/MMcf.
The seventh and eighth fastest growers for the first quarter, Occidental Petroleum Co. and Chesapeake Energy, were also on the list in the previous edition of this report, as was the fourteenth fastest grower, Sabine Royalty Trust, and the sixteenth company on the list, Noble Energy Inc.