The combined first-quarter 2010 earnings were vastly improved for a sample of US-based oil and gas producers and refiners. Upstream earnings were stronger as revenues surged on higher oil and gas prices from a year earlier. But downstream results disappointed, sending the results of the independent refiners into negative territory.
The sample of 74 oil and gas companies based in the US combined to turn around a collective loss in the 2009 first quarter into a net gain in the recent quarter.
Meanwhile, a sample of oil and gas producers and pipeline companies with headquarters in Canada posted a combined increase in net income and revenues for the recent quarter as compared to the first 2009 quarter. And a group of 24 service and supply companies recorded lower but positive net income as they continue to recover from a recession driven slump in drilling activity.
During this year's first quarter, the $78.88/bbl front-month futures price of West Texas Intermediate crude on the New York Mercantile Exchange averaged 82% higher than during the year-earlier quarter. Meanwhile, the average gas futures price in the recent quarter was $4.989/MMbtu, up from $4.468/MMbtu a year earlier.
A group of oil and gas producing companies and refiners with headquarters in the US posted a combined 42% increase in revenues in first-quarter 2010. Collective net income was $21.45 billion. In the first quarter of 2009, these companies combined for a $9.32 billion net loss.
Fifteen of the companies in the sample of US-based producers and refiners recorded a net loss for this year's first quarter, while 42 firms in the group incurred a loss for the 2009 first quarter.
Led by results from upstream operations, the large integrated firms reported much-improved earnings. ExxonMobil Corp. posted a 39% jump in earnings to $6.3 billion in the recent quarter. ConocoPhillips's earnings surged to $2.1 billion from $800 million, and Chevron Corp. posted $4.55 billion in first-quarter 2010 earnings, up from $1.8 billion a year earlier.
Devon Energy Corp. turned in a $1.19 billion profit in the recent quarter. This compares with a $3.96 billion loss in the 2009 first quarter, when the company booked a $4.2 billion after-tax reduction in the carrying value of its oil and gas properties.
In this year's first quarter, Devon also benefitted from higher oil and gas price realizations. Devon's average realized oil price increased in the 2010 first quarter to $67.58/bbl, up from $31.41/bbl in the first quarter of 2009. The company's average realized natural gas price increased 29% to $4.80/Mcf in the first quarter of 2010.
The Oklahoma City-based independent's marketing and midstream operating profit was $133 million in this year's first quarter, down 9% from a year earlier. The decline resulted from lower gas marketing margins partially offset by higher commodity prices, Devon reported. Also, first-quarter 2010 expenses in most categories decreased from the first quarter of 2009.
The refining companies in the sample of US companies reported losses for the 2010 first quarter, as acquisition prices for crude were high but product demand and product prices were relatively weak.
Gulf Coast cash refining margins weakened to average $3.97/bbl in the first 3 months of this year, down from $4.34/bbl a year earlier, according to Muse, Stancil & Co. Meanwhile, US Midwest refiners faced average cash margins of $4.20/bbl in this year's first quarter, down from $5.27/bbl a year earlier.
Frontier Oil Corp. reported a $40.3 million loss for this year's first quarter, as weak demand and relatively high product inventory levels contributed to poor product margins.
In addition, Holly Corp., Sunoco Inc., Tesoro Corp., and Valero Energy Corp. each reported a loss for the first quarter of this year, whereas each posted positive net income for the first quarter of 2009, when crude prices were lower.
The average composite cost of US and imported crude for US refiners was $76.64/bbl in the first quarter of this year, up from $40.39/bbl a year earlier, according to figures from the US Energy Information Administration.
Holly reported a loss of $23.3 million in the recent quarter. A year earlier, the Dallas-based company posted $23.4 million in earnings. The company's refineries produced 217,000 b/d of products, an increase of 151% over the same period of 2009 due to production from its recently acquired refinery in Tulsa plus higher production levels at its Navajo and Woods Cross refineries.
"The difficult refining environment that we experienced in late 2009 continued into the early months of 2010," said Matthew Clifton, Holly chairman and chief executive officer.
"General weak demand for gasoline and distillate products combined with increased crude costs led to the 2010 first-quarter loss. However, overall refinery margins compared somewhat favorably to the 2009 fourth quarter due to improvements late in the first quarter," Clifton said.
A sample of 12 companies based in Canada, including oil and gas producers and pipeline operators, reported a combined $4.3 billion (Can.) in earnings in this year's first quarter. In the first quarter of 2009, this group's combined earnings were $3.5 billion (Can.).
Suncor Energy Inc. reported first quarter 2010 net earnings of $716 million (Can.) compared to a net loss of $189 million (Can.) for the 2009 first quarter.
Suncor's first-quarter 2010 operating earnings decreased 24% from a year earlier, though, primarily due to reduced production volumes from oil sands operations, as the company recovered from the impact of two upgrader fires.
This was partially offset by additional upstream production as a result of the company's merger with Petro-Canada and higher benchmark oil prices in the quarter, partially offset by the stronger Canadian dollar relative to the US dollar, Suncor reported.
TransCanada Corp. reported a 9% decline in first-quarter 2010 net income to $303 million (Can.). The company's pipeline business segment earnings decreased from the first quarter of 2009 primarily due to the negative impact of a weaker US dollar, lower revenues from certain US pipelines, and higher business development costs relating to the Alaska pipeline project. TransCanada also reported decreased earnings in its energy segment primarily due to reduced realized electric power prices.
Service, supply companies
A group of 24 service and supply companies and engineering contractors posted a combined 38% decline in first-quarter earnings this year compared to the same 2009 period. Five of these companies recorded a loss for the first 3 months of this year.
Total revenues for this sample of firms declined 7.5% in this year's first quarter to $24.46 billion. Declines in results for the recent quarter were tempered by drilling activity in North America.
Schlumberger Ltd. reported first-quarter 2010 net income of $672 million, a 28% decline from a year earlier. Revenues were down almost 7% to $5.6 billion.
Schlumberger Chairman and Chief Executive Officer Andrew Gould, commenting on the market, said that in North America, commitment drilling to hold leases and interest in oil plays should sustain current levels of activity in the US through the second quarter. Beyond that, he said, the picture is less clear as natural gas prices and the fundamentals of the natural gas market remain uncertain.
"Higher oil prices are leading to tangible evidence that operators are contemplating higher levels of activity than originally planned in international markets. We reiterate our comment from the last quarter that we see improvements in some offshore markets, notably the UK sector of the North Sea, Latin America, and West Africa as well as on land in Russia," Gould said.
Gould also noted that international margins appear to have bottomed and are now likely to resume a positive trend, absent any exceptional circumstances.