Robert J. Beck
Economics Editor
Laura Bell
Statistics Editor
Total earnings improved in 1993 for Oil & Gas Journal's list of the largest publicly traded oil and gas producing companies in the U.S.
The gain in group net income came largely on the strength of increases posted by large integrated companies. It followed significant declines the preceding 2 years, when companies took large charges associated with restructuring and accounting changes.
Not all financial indicators improved in 1993.
Prices for crude oil and petroleum products were lower than they had been in 1992, which reduced total revenues. Partly offsetting these trends were higher natural gas prices, consumption, and production and increased consumption of petroleum products.
Total assets for the group fell fractionally for the third consecutive year in 1993, a reflection of continued industry restructuring.
Mergers, liquidations, and related activity change OGJ300 lists from year to year, so comparisons are for list totals and not for the same group of companies each time. And lists before that of 1991 included 400 companies; shortening of the list reflects concentration of the industry. Therefore, data for 1990 and earlier are for 400 rather than 300 companies.
Assets for this year's OGJ300, reflecting 1993 data, total $471.7 billion. Group assets the previous year (for 1992) totaled $472.2 billion.
OGJ300 net income for 1993 jumped 75.5% to $18.3 billion. Total earnings for group members in 1992 were down 37% from the previous year at $10.4 billion.
Other measures of financial and operating performance for the group showed improvement in 1993.
Capital and exploration spending totaled $50.3 billion, up 1.8% from 1992.
The number of U.S. net wells drilled rose 24.4% to 8,656. Spending and drilling both slumped the previous 2 years.
OGJ300 total revenues in 1993 fell 3.9% to $475.1 billion following declines of 2.5% in 1992 and 5.5% in 1991.
EARNINGS CLIMB
In addition to absence of the previous year's special charges, strong financial performance from downstream activities pushed up earnings for integrated producers in 1993.
Refining and marketing earnings generally improved, helped by sagging crude prices. Chemical earnings were mixed.
Growth in product demand, particularly in the U.S., helped to boost earnings. Product prices nevertheless sagged along with crude prices in the second half of the year, which kept gross refining margins thin.
Excess capacity continued to be a problem in the chemical sector, but the increase in economic activity helped to boost sales of some products.
In the U.S., petroleum product consumption moved up 1.2% in 1993 to average 17.237 million b/d. The U.S. refiner acquisition cost of crude oil fell 11 % to $16.41/bbl. That drop in prices was indicative of price movements worldwide.
However, the average U.S. refiner price of finished motor gasoline for resale dropped 7.6% to 62.5 cents/gal. The refiner resale price of No. 2 fuel oil slipped 5.9% to 54.5 cents/gal.
Outside of the U.S. product demand was up in many areas, although it was offset by a sharp decline in the C.I.S.
Demand in the Organisation for Economic Cooperation and Development (OECD) countries moved up 0.8% to average 39.1 million b/d in 1993, but the increase was all in North America. Demand in OECD Europe and OECD Pacific was unchanged from a year earlier.
Sluggish economic activity in industrial Europe and Japan slowed growth of petroleum consumption. In the non-OECD countries excluding the C.I.S. and East Europe, product demand moved up 5% to average 21.2 million b/d. The sharpest increase was in non-OECD Asia, where demand moved up 6.3% to 6.8 million b/d.
Average world export crude prices fell 11.9% in 1993 to $15.81/bbl. The effect on refining margins in Europe and Asia was partially offset by lower product prices in most markets.
According to the International Energy Agency (IEA), average annual product worth based on Rotterdam spot prices slipped 8.3% in 1993 to $20.27/bbl. The IEA calculation of average product value based on the Singapore spot market showed a decline of 6.9% to $17.17/bbl.
Earnings from U.S. exploration and production activities were mixed. For individual companies they depended on the gas share of total production since gas prices were relatively high in 1993 while crude prices were low.
Earnings from non-U.S. upstream operations were also mixed. Some companies managed to boost production volumes and offset some of the revenue decline associated with the crude price drop. Gas prices were not up generally as they were in the U.S. But gas production volumes outside the U.S. increased, which offset some of the revenue decline from lower prices.
In the U.S. the average wellhead price of natural gas jumped 15.5% in 1993 to average $2.01 /Mcf. Consumption of natural gas increased 3.2% to 20.2 tcf, and U.S. marketed production of natural gas moved up 2.9% to 19.2 tcf. U.S. gas production for companies in the OGJ300 increased 2.1% to 10.5 tcf. OGJ300 group natural gas production outside the U.S. was up 4.1 % at 4 tcf.
Offsetting the 1993 revenue gains from natural gas was a 11.2% drop in the U.S. average wellhead price of crude oil to $14.20/bbl. Total U.S. liquids production for the group fell 4.6%.
SPENDING RISES
OGJ300 spending in recent years has generally reflected earnings improvements from the depressed levels of 1986 and 1987.
Group net income averaged $18.5 billion/year during 1988-93. During the same period, group capital and exploration spending ranged from $49.2 billion to $56.2 billion and averaged $51.3 billion.
In 1987 group income totaled only $9.4 billion and in 1986, $5.2 billion.
Annual income totals for the OGJ300 were $22.3 billion in 1988, $20.3 billion in 1989, $23.2 billion in 1990, $16.6 billion in 1991, and $10.4 billion in 1992.
With the sharp improvement in OGJ300 earnings in 1988, capital and exploration spending increased 20.3% to $50.1 billion. Group spending totaled $49.2 billion in 1989, $56.2 billion in 1990, $52.9 billion in 1991, and $49.4 billion in 1992.
UPSTREAM ACTIVITY
The 24% gain in net U.S. wells drilled by OGJ300 companies last year follows drops of 23% in 1992 and 16% in 1991.
Over the last 6 years, U.S. drilling activity has not risen in step with earnings. In 1986, group profits were only $5.2 billion, and the companies drilled 10,993 net wells. Profits in 1991 were up $11.4 billion from the 1986 level but net U.S. wells drilled totaled only 9,146.
The depressed earnings of 1992 were still up $5.2 billion from 1986, but 4,093 fewer wells were drilled. In 1993 earnings were up $13.1 billion from 1986, net wells drilled down 2,337.
Results for the OGJ300 reflect the status of overall U.S. drilling activity, which has been depressed since the collapse of crude oil prices in 1986.
The U.S. average active rig count has set a number of record lows since then: 964 average rigs in 1986, 936 in 1987, and 869 in 1989. There was a slight resurgence of drilling in 1990, when the average rig count moved up to 1,010.
But the slide continued with record lows of 860 in 1991 and 717 in 1992. The rig count moved up slightly to average 757 in 1993.
Higher natural gas prices and demand raised drilling activity earlier this year. The rig count for the first 7 months of 1994 averaged 749 vs. 693 in 1993.
Since the mid-1980s, oil and gas prices have fallen, taxes and environmental regulations have risen, and access has diminished to the best remaining U.S. exploratory prospects, most of which are on federal land.
The average wellhead price of U.S. crude oil fell from $24.09/bbl in 1985 to $12.51/bbl in 1986.
A period of fluctuation followed. The average U.S. wellhead price was $15.40/bbl in 1987, $12.58/bbl in 1988, and $15.86/bbl in 1989. Because of the Persian Gulf crisis, the price jumped to $20.03/bbl in 1990. But the wellhead price averaged only $16.54/bbl in 1991, $15.99/bbl in 1992, and $14.20/bbl in 1993.
Until recently, prices for natural gas tended to follow the crude price. The U.S. average wellhead price for gas fell from $2.51/Mcf in 1985 to $1.69/Mcf in 1987. It averaged $1.69/Mcf in 1988 and 1989, $1.71/Mcf in 1990, and $1.64/Mcf in 1991.
The apparent uncoupling of oil and gas prices came in 1992, when wellhead natural gas prices moved up 6.1% while oil prices fell. Last year the natural gas price increased 15.5% as oil prices continued to slide.
WORLDWIDE ACTIVITY
International drilling has not been as severely depressed as U.S. activity, although it, too, has suffered.
The number of active drilling rigs outside the U.S. and Canada averaged 1,289 in 1985 and fell to 1,079 in 1986 following the price collapse. The count averaged 981 in 1987, 1,023 in 1988, 922 in 1989, 907 in 1990, 909 in 1991, and 857 in 1992. Last year, the rig count outside the U.S. and Canada averaged 773.
A bright spot in 1993 was Canada, where the rig count had plummeted from 310 in 1985 to 97 in 1992. Last year the active rig average jumped to 184 on the strength of demand for natural gas for export to the U.S.
World crude oil prices weakened in the second half of 1993 after a period of relative stability following the Persian Gulf War. Prices dipped immediately following the Gulf war but then leveled off in the $16-18/bbl range for most of the remainder of 1991 and averaged $17.82/bbl for the year.
Prices started to slide in the first half of 1992, but Saudi Arabia cut production and crude oil prices averaged $17.95/bbl for the year.
In 1993 the average price for world export crude oil remained in the $16$18/bbl range for the first half of the year, then slumped to $12.44/bbl by yearend, averaging $15.81/bbl for the year.
A crude price rebound this year hasn't stimulated drilling outside the U.S. and Canada. The international rig count averaged only 741 for the first 7 months of 1994.
Canada, however, remains active, with the rig count during the first 7 months of the year averaging 243.
FINANCIAL RESULTS
Last year 192 of the OGJ300 companies posted profits, compared with 175 the year before. ln 1986 only 116 of the OGJ400 companies recorded profits.
With the sharp increase in net income the indicators of financial performance also bounced back in 1993 after 2 years of decline. Return on assets for the group increased to 3.9% in 1993 from 2.2% in 1992, 3.4% in 1991, and 4.7% in 1990. Return on assets had slumped to only 1% in 1986. The best year was 1982 at 5.7%.
The group's return on revenue moved up to 3.9% from 2.1% in 1992 as income rose and revenue declined. Return on revenue was 3.3% in 1991 and 4.3% in 1990. The highest return on revenue posted for the OGJ300/400 was 5.1% in 1988. The lowest return on revenue was 1.2% in 1986.
Return on stockholders' equity increased in 1993 to 10.9% from 6.4% the year before. Return on equity was 9.8% in 1991 and 13.6% in 1990. The highest level for this measure of performance was 13.8% in 1982, and the low was 3% in 1986.
GROUP OPERATIONS
OGJ3OO operations indicators were mixed in 1993. Natural gas production and reserves moved up, while liquids reserves and production slipped, both worldwide and in the U.S.
Group worldwide natural gas production increased 2.7% to 14.5 tcf, the highest output since the OGJ400/300 began in 1983.
OGJ300 worldwide liquids production slipped 1.5% in 1993 to 2.994 billion bbl. The decline was primarily because U.S. liquids production by the group was off 4.6% at 1.877 billion bbl. The group's U.S. and worldwide liquids production has been falling since 1985. The group's non-U.S. liquids output moved up 4.2% to 1.107 billion bbl in 1993.
Liquids reserves fell while natural gas reserves increased for the OGJ3OO in 1993. Worldwide liquids reserves were down 5.8% at 28.2 billion bbl. This followed decreases of 2.7% in 1992, 3.2% in 1991, and 8% in 1990. Group worldwide reserves have been falling since 1988.
U.S. liquids reserves fell 3.2% to 19.7 billion bbl at yearend 1993. The group's U.S. liquids reserves have been falling since 1987.
The group's non-U.S. liquids reserves were down 11.3% at 8.6 billion bbl at yearend 1993.
Worldwide natural gas reserves for the OGJ300 group moved up in 1993 following 4 years of declines. They increased 10.8% to 172.4 tcf, mostly outside the U.S. Group natural gas reserves in the U.S. also increased 0.7% to 105.8 tcf. The group's U.S. reserves of natural gas fell 3.6% the year before.
GROUP CHANGES
The OGJ300 list itself remains in flux as restructuring and consolidation continue.
This year's list contains 31 new company names. The year before there were 33 new companies on the list and 48 the year before that.
OGJ included all publicly traded companies with U.S. production for which financial reports were available. It also included seven of the largest publicly traded limited partnerships (LPs).
The largest LP listed is Enserch Exploration Partners Ltd., with assets of $1.086 billion. The smallest LP on the list, Callon Consolidated Partners, had assets of $19.3 million.
There are nine royalty trusts listed and 18 subsidiaries of non-U.S. energy companies or of companies operating mainly in nonpetroleum industries.
The smallest company in this year's OGJ300 had 1993 assets of $84,000, up from only $26,000 last year but down from $271,000 in 1992. Last year had the lowest asset cutoff point since the OGJ300/400 began.
In 1993 the number of companies posting net incomes exceeding $100 million moved up to 24 from 19 in 1992. Companies posting income at that level totaled 18 in 1991, 30 in 1990, 28 in 1989 and 1988, and 21 in 1987.
A total of 108 companies posted net losses for 1993, compared with 125 in 1992. Four companies posted losses of $100 million or more in 1993 vs. seven in 1992 and four in 1991.
THE TOP 20
There are no new companies in the top 20 in this year's OGJ300, as ranked by assets, although there was some reordering.
Enron moved up two positions to number 11. Phillips slipped one position to 12th, and USX-Marathon slipped one position to 13th.
The top 20 companies had total assets of $393.4 billion, down from $396 billion in 1992, $403.3 billion in 1991, and $408.9 billion in 1990. Assets of the top 20 companies represented 83.4% of the total OGJ300 in 1993, compared with 83.9% in 1992 and 82.6% in 1991.
The top 20 received revenues of $431.8 billion in 1993, down from $452 billion in 1992 and $459.9 billion in 1991. This was 90.8% of total revenue for the OGJ300 vs. 91.5% of the total last year.
Total net income of the top 20 was $16.4 billion vs. $9.4 billion for 1992 and $15.8 billion in 1991. In 1993 net income for the top 20 was 89.4% of the total, compared with 90.3% in 1992 and 95.2% in 1991.
Two of the 20 biggest companies, Conoco and BP (U.S.A.), are subsidiaries and do not report stockholders' equity. Total stockholders' equity for the remaining 18 companies of the top 20 totaled $137.9 billion in 1993, 82.7% of the OGJ300 total.
Capital and exploration expenditures by the top 20 group in 1993 amounted to $38.3 billion, down from $41.2 billion in 1992 and $41.7 billion in 1991. This was 76.1% of the OGJ300 total in 1993.
The top 20 drilled 3,788 net wells in 1993, compared with 3,599 in 1992 and 5,370 in 1991. In 1993 this was 43.8% of wells drilled by the OGJ300 group of companies.
The top 20 companies accounted for 87.2% of the OGJ300's worldwide liquids production and 83.7% of its U.S. liquids production. They had 74% of the worldwide natural gas production total and 65.4% of U.S. natural gas production.
The top 20 companies hold 90.6% of the OGJ300's worldwide liquids reserves and 86.3% of its U.S. liquids reserves. They also have 68.7% of the worldwide natural gas reserves and 65.7% of the U.S. natural gas reserves.
WHAT IT REPRESENTS
The OGJ300's total revenue of $475.1 billion in 1993 was equal to 7.4% of U.S. gross domestic product (GDP). This compares with 8.2% in 1992, 8.9% in 1991, and 9.7% in 1990. The OGJ group's revenues were as much as 18.4% of GDP in 1983.
The OGJ300 companies' total liquids production was 59.9% of the U.S. total; natural gas production was 54.4% of the U.S. total. The group has 63% of total U.S. liquids reserves and 64.1% of U.S. natural gas reserves.
The OGJ300 group holds 2.8% of worldwide liquids reserves and 3.4% of natural gas reserves. In 1993 group output was 12.5% of worldwide liquids production and 19.6% of worldwide natural gas production.
FAST GROWERS
Ranking for the OGJ300 list of the fastest growing companies is based on growth in stockholders' equity.
Other qualifications are that companies have positive net income for 1993 and 1992 and have an increase in net income in 1993. Subsidiary companies, newly public companies, and LPs are not included.
Most of the fastest growing companies posted substantial increases in net income in 1993. Ten of the 20 companies in the fast-growth list had increases in net income of 100% or more. And all but one of them posted increases of more than 20%.
The long term debt positions of the companies on the list were mixed. Nine of the companies increased long term debt, nine decreased long term debt, and two were unchanged with no long term debt.
Mystique Development Inc., which ranked 298 in assets, led the list in growth rate this year. Its stockholders' equity moved up 2,900%, and net income increased 1,000% to $170,000 in 1993.
Three of the companies were on the fast-growth list last year, and Lomak Petroleum made the list for the fourth year in a row. Gerrity Oil & Gas was on the list for the third straight year, and Summit Petroleum was a repeater from last year.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
