FINANCIAL, OPERATING RESULTS, ASSETS TOTAL DOWN FOR OGJ300

Robert J. Beck
Economics Editor
Valerie Sanders
Statistics Editor

Some Key Changes From 1992 OGJ300 [205,289 bytes]
Top Companies In Return On... [431,962 bytes]
Fastest Growing Companies* [803,085 bytes]
Top 20 In Total Revenue [265,669 bytes]
The Top 20 In Net Income And Stockholders' Equity [705,256 bytes]
The Top 20 In Spending And U.S. Net Wells Drilled [685,897 bytes]
The Top 20 In Liquids Reserves [720,896 bytes]
The Top 20 In Liquids Production [692,248 bytes]
The Top 20 In Gas Reserves [688,371 bytes]
The Top 20 In Gas Production [688,003 bytes]
OGJ300 [1,341,880 bytes]
Financial and operating results of the Oil & Gas Journal 300 dropped again in 1992.

It was the second consecutive set of declines for OGJ's list of the largest publicly traded, oil and gas producing companies in the U.S. Totals fell from 1991 results in almost all categories of financial and operating performance.

Group net income fell sharply in 1992. Large, integrated companies reported sharp earnings declines, many of them related to special charges for restructuring and mandatory accounting changes.

In addition, revenues were suppressed by lower crude and product prices below levels of 1991 and a decline in total crude production. This was partially offset by higher prices and demand for natural gas and by increased demand for petroleum products.

Total assets for the group fell for the second consecutive year in 1992. This appears to be a result of industry restructuring, downsizing for efficiency, and redefining business objectives.

The number of public companies operating in the U.S. is declining as the industry becomes more concentrated. Two years ago the OGJ400 list of companies became the OGJ 300.

In the past 7 years, profits of U.S. companies have been depressed by low oil and natural gas prices. Excess worldwide energy production capacity has kept prices of energy from rising in line with inflation and the costs of operations. New government regulations, related mainly to the environment, have driven up the cost of operations and restricted access to exploratory prospects.

Companies have been forced to consolidate operations, seek mergers, and sell assets to remain profitable.

This year's group represents 1992 assets of $472.3 billion, down 3.3% from last year's group, which was down 2.2% from its predecessor.

Net income for this year's OGJ300 fell 37% from last year's list to $10.4 billion. Profits for last year's group fell 28.8% from the 1991 OGJ300 to $16.6 billion.

Capital and exploration spending fell, but not as abruptly as income. Capital outlays by this year's group totaled $49.4 billion in 1992, compared with $52.8 billion reported by the 1992 OGJ300 for 1991.

Stockholders' equity fell 3.5% to $163 billion in 1992. Stockholders' equity was a high of $233.8 billion in 1983.

U.S. net wells drilled in 1992 by this year's group fell 23.9% from the year earlier to 6,957. The 1992 group had posted declines from the preceding year of 5.9% in capital and exploratory spending and 15.9% in net wells drilled.

Part of the decline in earnings was attributable to the decrease in total revenues. Group 1992 revenues totaled $494.4 billion, down from $507.1 billion for the OGJ300 a year earlier.

The earnings slump

Aggravating the effects on earnings of restructuring and accounting changes last year were weak performances from downstream activities.

Refining and marketing operations turned in mixed results in 1992, while earnings from chemical operations fell for most companies. Chemical problems were sluggish demand growth, low product prices, and excess capacity.

In the U.S., petroleum product consumption moved up 1.9% in 1992 to 17,033 million b/d. But product prices slipped enough to offset the volume gains.

The average U.S. refiner price of finished motor gasoline for resale dropped 3.1% to 67.7?/gal. The refiner resale price of No. 2 fuel oil slipped 7% to 57.9?/gal.

Outside the U.S., product demand was up in most areas except in the C.I.S. and East Europe. Demand in the Organisation for Economic Cooperation and Development (OECD) countries moved up 1.3% to average 38.8 million b/d in 1992. In the non-OECD countries excluding the C.I.S, and East Europe, product demand moved up 6.3% to 20.1 million b/d.

The growth of product demand in Europe and the developing countries was also offset by lower product prices. According to the International Energy Agency (IEA), average annual product worth based on Rotterdam spot prices slipped 10.2% in 1992 to $22.11/bbl. The IEA calculation of average product value based on the Singapore spot market showed a decline of 8% to $20.06/bbl.

A sharp rise in natural gas prices helped boost U.S. earnings from exploration and production in 1992. The jump in natural gas prices more than offset the slide in U.S. crude oil production and prices.

Earnings from non-U. S. E&P operations were mixed. In 1992 there was little change in world export prices for crude oil from the year before. Changes in production volumes were varied, with some areas posting gains and others declines from a year earlier.

In the U.S., the average wellhead price of natural gas jumped 9.8% in 1992 to $1.80/Mcf. Marketed production of natural gas moved up 0.2% to18.6 tcf. Natural gas production for the OGJ300 slipped 1.9% to 10.3 tcf.

Offsetting the 1992 gains from natural gas was a 3.4% drop in the U.S. average wellhead price of crude oil to $15.98/bbl. In addition, U.S. crude oil production fell 3.3% to average 7.171 million b/d last year. Total liquids production for the OGJ300 fell 6%.

The average world price of non-OPEC export crude oil was $18.51/bbl in 1992, compared with $18.52/bbl the year before. Substantial production gains were posted in Canada, Norway, the U.K., Angola, and Congo.

Spending down

The 6.6% group drop in 1992 capital and exploration spending was the second straight decline for the OGJ300.

In recent years spending by the group has reflected an earnings recovery from the slump of 1986, when OGJ400 profits totaled $5.2 billion, and 1987, when they totaled $9.4 billion.

Without the extraordinary factors in 1992's earnings, operating profits changed little from the year before. Spending this year, therefore, may not be down as much as the earnings drop might otherwise indicate.

During 1988-92, group net income averaged $18.6 billion. The 1989 OGJ400 represented total 1988 net income of $22.3 billion. The next year's total slipped to $20.3 billion before rising to $23.2 billion for the 1991 list.

During the same 5 years, capital and exploration spending averaged $51.5 billion/year. With the sharp improvement in 1988 earnings reflected in the 1989 OGJ400, capital and exploration spending increased 20.3% to $50.1 billion. Group capital and exploration spending dipped slightly to $49.2 billion in 1989. In 1990 spending rose again-14.3% to $56.2 billion. It fell to $52.9 billion in 1991.

Group spending was as high as $66.5 billion in 1983, when net income totaled $28 billion. Capital outlays for the OGJ400 group were more than $65 billion/year in 1982-85.

Upstream activity

The large 1992 group drop in U.S. drilling activity follows a 15.9% decline in 1991 to 9,146 wells.

U.S. drilling has not moved with earnings recently. The 1987 OGJ400 companies drilled 10,993 net wells in 1986, when earnings totaled only $5.2 billion. Profits in 1991 moved up $11.4 billion from that slump, but net U.S. wells drilled totaled only 9,146.

While 1992 profits were still up $5.2 billion from the 1986 level, wells drilled were down 4,036 from that year's total reflected in the 1987 OGJ400.

U.S. drilling activity has been depressed since the collapse of crude oil prices in 1986. The U.S. average active rig count has set a series of record lows since then: 964 in 1986, 936 in 1987, and 869 in 1989.

There was a slight resurgence of drilling activity in 1990, when the average rig count moved up to 1,010. But the slide continued with new record lows of 860 in 1991 and 717 in 1992.

Rising natural gas prices and relatively stable oil prices have stimulated activity this year. The rig count for the first 33 weeks of 1993 has averaged 699 vs. 661 in 1992.

The low drilling activity in the U.S. results from a combination of factors. Crude and gas prices are well below their averages of the early 1980s.

In addition, rising taxes, increasing environmental costs, and restricted access to federal acreage are taking their toll on drilling. Furthermore, companies are using technological advances such as 3D seismic and horizontal drilling to improve efficiency and reduce the number of holes needed to meet operating objectives.

The average wellhead price of U.S. crude oil fell from $24.09/bbl in 1985 to $12.51/bbl in 1986 when key members of the Organization of Petroleum Exporting Countries abandoned production restraints.

Prices have fluctuated since then but never reached back to their levels prior to the price crash.

The average annual U.S. wellhead price moved up to $15.40/bbl in 1987, fell to $12.58/bbl in 1988, and rose to $15.86/bbl in 1989. In 1990, the year of the conflict in the Persian Gulf, the U.S. wellhead price jumped to an average $20.03/bbl for the year. The price fell to $16.54/bbl in 1991 and $15.98/bbl in 1992.

In the last half of the 1980s natural gas prices followed the slide in oil prices. The U.S. average wellhead price for gas fell from $2.51/Mcf in 1985 to $1.69/Mcf in 1987 then rose to $1.69/Mcf in 1988 and 1989 and $1.71/Mcf in 1990 before slumping to $1.64/Mcf in 1991. The gas price uncoupled from oil in 1992, rising 9.8% while oil prices fell.

Worldwide activity

Worldwide drilling activity has not been as depressed as in the U.S., but it has been down due to sagging crude oil prices.

The number of active rigs outside the U.S. and Canada averaged 1,289 in 1985 and fell to 1,079 in 1986 and 981 in 1987. It rose to 1,023 in 1988 and fell again to 922 in 1989, 907 in 1990, and 909 in 1991. The count sank to an average of 857 last year.

Drilling activity in Canada also fell sharply to an average of only 97 active rigs in 1992.

World crude oil prices have been relatively stable since 1991. Prices dipped immediately following the Persian Gulf war but 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 early in 1992, but Saudi Arabia cut production and the market firmed. Crude prices averaged $17.95/bbl for the year.

This year the average price for world export crude oil has remained in a relatively narrow band of $15.98-17.60/bbl.

Relative price stability has not stimulated drilling activity outside the U.S. and Canada. The international rig count has slipped to an average of only 772 for the first 7 months of 1993.

Canadian activity, however, has been stimulated by demand for gas in the U.S. The Canadian rig count jumped to an average of 168 for the first 7 months of this year.

In recent years, U.S. companies have dedicated growing shares of their capital budgets to projects outside the U.S.

The increased investment has not produced an increase in drilling, however, as much of the investment has focused on licensing and nondrilling exploratory techniques.

Financial results

Of the 300 companies on this year's list, 175 posted profits for 1992, compared with 169 on the 1992 OGJ300.

The net income slump in 1992 suppressed profitability indicators for this year's group. Return on assets for the group dropped to 2.2% from 3.4% the year before and 4.7% in 1990. Return on assets amounted to only 1% in 1986. The best year was 1982 at 5.7%.

The return on revenue for the group slipped to 2.1% in 1992 from 3.3% for last year's group. The highest return on revenue posted since the OGJ400/300 began in 1982 was 5.1% in 1988, reported in the 1989 OGJ400. The lowest return on revenue was 1.2% in 1986.

Return on stockholders' equity fell in 1992 to 6.4% from 9.8% in 1991 and 13.6% in 1990. The highest level for this measure of performance was 13.8% in 1982; the low was 3% in1986.

The OGJ400/300 group of companies constantly changes so year-to-year comparisons are not for identical groups. However the group does represent a large portion of the domestic oil and gas industry and therefore represents changes and trends in industry activity and operating performance.

Group operations

All but one indicator of group operating performance fell in 1992. The exception was worldwide natural gas production, which moved up 0.4% to 14.1 tcf in 1992. Group worldwide gas production has remained close to this level for the past 4 years.

The increase in worldwide output came despite a 1.9% drop in group U.S. natural gas production to 10.3 tcf.

All of the other key operating statistics declined.

OGJ3OO worldwide liquids production slipped 2.3% in 1992 to 3.03 billion bbl. U.S. liquids production by the group fell 6.1% to 1.97 billion bbl. The group's U.S. and worldwide liquids production has been falling since 1985.

OGJ300 reserves of liquids and natural gas fell in 1992. Worldwide liquids reserves were down 2.7% to 29.98 billion bbl. This followed a 3.2% decline in 1991 and an 8% drop in 1990 in a trend that began in 1988.

U.S. liquids reserves of the group fell 4% to 20.3 billion bbl at yearend 1992. The group's U.S. liquids reserves have been falling since 1987.

Worldwide natural gas reserves of the OGJ300 fell 2.9% in 1992 to 155.6 tcf, the fourth consecutive yearly decline. Natural gas reserves in the U.S. dropped 3.6% to 105 tcf. The group's U.S. reserves of natural gas fell 4.3% the year before.

Changes continue

This year's OGJ300 list contains 33 companies that didn't appear before. Last year's list had 48 new companies, compared with 26 the year before.

The OGJ300 includes all publicly traded companies with U.S. production for which financial reports are available. This year it contains five of the largest publicly traded limited partnerships (LPs). Last year there were six LPs, down from 30 the year before. In 1990 the list included 95 LPs.

The largest LP listed this year is Santa Fe Energy Partners, with assets of $270 million. The smallest LP on the list, Callon Consolidated Partners, had assets of $20 million.

There are four royalty trusts listed, compared with four last year and five the year before. There are 16 companies that are subsidiaries of non-U.S. energy companies or of companies operating mainly in another industry.

Publicly held LPs were first included in the OGJ400 of 1988, when a number of drilling and income funds were being converted to LPs for tax advantages. Many functioned like income funds but were organized like partnerships, often created by investment firms with experience in oil and gas financing.

LPs were included in the OGJ300/400 lists because they hold U.S. reserves and have publicly traded units.

OGJ, however, gives preference to traditional publicly traded companies with U.S. production. Some public LPs not on the list have assets greater than traditional companies that do appear.

To be included in this year's OGJ300 list required assets of only $26,000, down from $271,000 last year. This is the lowest asset cutoff point since the OGJ300/400 started.

This cutoff asset number has fluctuated substantially from a previous low of $71,000 in 1990 up to a high of $2.366 million in 1983. Consolidations writedowns, and other forms of restructuring have changed the asset cutoff.

The asset value threshold for the top 100 companies on the list moved up to $111.3 million this year from $108.7 million.

The number of companies posting net incomes of over $100 million in 1992 moved up to 19 from 18 in 1991. There were 30 such companies in 1990, 28 in 1989 and 1988, and 21 in 1987.

A total of 125 companies posted net losses for 1992. Seven of the companies posted losses of $100 million or more vs. four companies last year.

Top 20 companies

There were no new companies in the top 20 in 1992. And no company in the top 20 moved more than one position up or down the list.

Assets for the top 20 companies fell in 1992, but the concentration of assets in the subgroup increased.

The biggest 20 asset holders had total assets of $396 billion in 1992, down from $403.3 billion in 1991 and $408.9 billion in 1990. This represented 83.9% of the assets of the 1993 OGJ300, up from 82.6% last year and 81.9% in 1990.

The top 20 generated revenues of $452 billion in 1992, down from $459.9 billion in 1991. This was 91.5% of the OGJ300 total, compared with 90.7% last year.

Net income of the top 20 was $9.4 billion, 90.3% of the group total, in 1992, compared with $15.8 billion, 95.2% of the total, in 1991.

Two of the companies in the top 20, Conoco and BP (USA), do not report stockholders' equity. Total stockholders' equity for the remaining 18 companies of the top 20 totaled $134.3 billion, 82.4% of the total.

Capital and exploration expenditures by the top 20 group in 1992 amounted to $41.2 billion, compared with $41.7 billion last year. This was 83.4% of OGJ300 capital spending in 1992. The top subgroup drilled 3,599 net wells in 1992, 51.7% of the OGJ300 total, down from 5,370 in 1991.

The top 20 asset holders accounted for 87.6% of OGJ300 worldwide liquids production and 84.8% of U.S. liquids production. They had 75.2% of the worldwide natural gas production and 67.9% of the U.S. gas production.

They hold 88.2% of the OG300 group's worldwide liquids reserves, 86.7% of U.S. liquids reserves, 76.9% of worldwide gas reserves, and 68.4% of U.S. gas reserves.

Where OGJ300 fits

The OGJ300 group's total revenue of $194.4 billion in 1992 amounted to 8.3% of U.S. gross domestic product (GDP). This was down from 8.9% in 1991 and 9.7% in 1990, OGJ300/400 group revenues have been as high as18.4% of GDP in1983.

U.S. liquids production by this year's OGJ300 represented 59.7% of the U.S. total in 1992, gas production 55.1% of the total. The group accounted for 63.1% of total U.S. liquids reserves and 62.9% of total U.S. gas reserves.

The group is not as dominant worldwide as it is in the U.S., largely because OPEC countries and non-OPEC national oil companies control significant reserves and production volumes.

The OGJ300 represents 3% of liquids reserves and 3.2% of natural gas reserves worldwide. Group production in 1992 was 12.7% of the worldwide total for liquids and 19.6% for gas.

These world shares may move up in the future to the extent that investments outside the U.S. prove successful.

The fast growers

The OGJ300 ranks growth on the basis of stockholders' equity. Other qualifications for inclusion on the top 20 growth list are positive net income for 1992 and 1991 and income growth in 1992. Subsidiary companies, newly public companies, and LPs are not included. Many of the fastest growing companies posted substantial increases in net income in 1992; 10 had increases in net income of 100% or more. And fast growers posted increases exceeding 20%.

The long term debt positions of companies on the top 20 growth list were mixed. Seven of the companies increased long term debt, 11 decreased, and two were unchanged with no long term debt.

Tipperary Corp. led the growth list this year. Its stockholders' equity moved up 502.9%, and net income increased 1,529% to $14.6 million in 1992. It ranked 156 in assets.

Five of the companies were on the fast growth list last year. Lomak Petroleum appeared on the list for the third year in a row. Other repeaters were Gerrity Oil & Gas, Production Operators Corp., Parker & Parsley Petroleum, and Prima Energy.