Consolidation Shrinks List Of U.S. Companies

Robert J. Beck
Associate Managing Editor-Economics

Laura Bell
Statistics Editor

Mergers, acquisitions, and other forms of consolidation have again shrunk the Oil & Gas Journal list of publicly traded oil and gas producers in the U.S.

The annual, assets-ranked compilation of companies, which began as the OGJ400 and became the OGJ300 in 1991, is now the OGJ200.

Although the list has shrunk, the total of assets that it represents has held steady. And many of the asset changes reflect reevaluations and sales of properties unrelated to oil and gas production.

As always, data for this year's list reflect the prior year's operations.

Assets for the OGJ200 group totaled $480.8 billion for 1995, compared with $483.4 billion in 1994 for last year's OGJ300, which included 281 companies. The 1993 assets total for 1994's OGJ300 was $471.7 billion.

Assets in 1994 for just the 200 companies that appear in this year's list totaled $483.2 billion.

Total stockholders' equity of companies represented by this year's OGJ200 increased 1.9% from a year earlier to $174.4 billion.

Comparisons of yearly totals must take into account the company changes that occur from list to list. In any given year the OGJ list represents a significant part of the U.S. oil and gas industry and therefore accurately reflects overall industry activity and financial performance. In this report, except where specified otherwise, comparisons between 1995 and 1994 data will be for just the companies on this year's list.

The OGJ200 ranks companies by assets without regard to whether they use the full cost or successful efforts method of accounting.

Highlights

Total 1995 revenues for OGJ200 companies rose 6% from the year before to $514.2 billion.

Net income totaled $18.6 billion, up 15.3% from the 1994 total. Higher crude oil prices were a factor, but increased efficiency and new technology have made major contributions to profits.

Capital and exploration spending by the OGJ200 group totaled $53.9 billion in 1995, up 8% from 1994.

Despite the higher spending, the number of net wells drilled by the OGJ200 companies slipped to 9,202 from 9,808 a year earlier.

The industry in 1995

Improvement in the OGJ200's financial performance reflected general improvement in the U.S. and worldwide oil and gas industry in 1995. Demand for oil and natural gas moved up, and oil prices were significantly higher than they were the year before.

Petroleum product consumption moved up in many countries, with the former Soviet Union (F.S.U.) continuing to be a major exception.

According to estimates from the International Energy Agency (IEA), oil consumption in the industrialized countries that belong to the Organisation for Economic Cooperation and Development (OECD) increased 1% to average 40.3 million b/d for 1995. The greatest increase was in demand in OECD Europe, up 2.2% to average 13.9 million b/d.

In non-OECD countries excluding the F.S.U., product demand moved up 3.8% to average 24.8 million b/d. The sharpest increase was in non-OECD Asia, where demand rose 8.1% to 8 million b/d.

Demand in the F.S.U. leveled off at 4.8 million b/d after declining sharply during 1990-94.

In the U.S., petroleum product consumption moved up 7,000 b/d to average 17.725 million b/d in 1995. Although total demand was not up significantly, demand for the lighter and often more-profitable products increased. Consumption of motor gasoline increased 188,000 b/d to a record high 7.789 million b/d. And distillate demand moved up 45,000 b/d in 1995 to average 3.207 million b/d.

Worldwide natural gas consumption increased 2.5% in 1995 to 73.9 tcf. The increase came in spite of a 4.7% drop in F.S.U. consumption to 18.4 tcf. Natural gas consumption increased 7.4% in Europe to 13.3 tcf, 9.4% in Central and South America to 2.8 tcf, and 4.8% in Asia and Australia to 7.6 tcf.

In the U.S., natural gas consumption increased 4.3% to 21.7 tcf, the second highest level on record.

OGJ200 group revenues and earnings in 1995 were also bolstered by higher oil prices worldwide and higher product prices in the U.S. This was partially offset by lower U.S. natural gas prices.

The world export price of crude oil increased 9.8% in 1995 over 1994, averaging $16.78/bbl. The price of light sweet crude oil on the New York Mercantile Exchange (Nymex) increased 7.1% to average $18.37/bbl for the year. And the average U.S. wellhead price for crude oil moved up 10.8% to $14.62/bbl. The average U.S. refiner acquisition cost of both domestic and imported crude oil was up 10.6% at $17.24/bbl.

In the U.S., product prices also moved up in 1995, but at a lower pace. The refiner prices for motor gasoline increased by 4.5% in 1995 to average 62.6/gal, for aviation gasoline by 4.5% to 97.5/gal, and for No. 2 diesel fuel by 1.7% to 53.8/gal. The price of resid sold by refiners to end users increased 11.1% to average 39.1/gal.

With crude oil prices rising faster than product prices, refining margins shrunk in 1995. According to Wright Killen, the average U.S. Gulf Coast cash operating margin fell to 33/bbl in 1995 from 88/bbl in 1994 and $1.39/bbl in 1993.

Lower natural gas prices also offset some of the revenue and income gains from higher crude oil and petroleum product prices. The Nymex price of natural gas fell by 13% from 1994 to an average of $1.69/MMBTU in 1995. The average U.S. wellhead price of natural gas fell 15.4% to average $1.59/Mcf in 1995. Some of the decline in prices was offset by increased natural gas consumption.

In 1995 drilling activity slipped in the U.S. and Canada but increased elsewhere. U.S. and Canadian drilling activity has increasingly been focused on natural gas.

The average rotary rig count for the U.S. slipped to 723 in 1995 from 775 the year before and for Canada to 229 from 262.

Rising crude oil prices boosted the average rig count outside the U.S. and Canada to 759 in 1995 from 734 in 1994.

Financial performance

Of this year's OGJ200 companies, 121 reported profits for 1995. Among all 281 companies on last year's list, 165 reported profits for 1994.

In 1995 the number of companies with net incomes exceeding $100 million slipped to 18 from 23 in 1994, 24 in 1993, and 19 in 1992. There were 18 such companies in 1991 and 30 in 1990.

A total of 79 OGJ200 companies posted net losses in 1995, compared to 116 out of 281 companies in 1994, 108 out of 300 companies in 1993, and 125 in 1992. Eight of this year's companies posted losses of $100 million or more in 1995, compared to four in 1994 and 1993, and seven in 1992.

Return on assets for the OGJ200 group increased to 3.9% in 1995 from 3.3% in 1994. The ratio was 3.9% for OGJ300 companies in 1993, 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 return on revenue for the OGJ200 companies moved up to 3.6% from 3.3% in 1994. Returns on revenue for full OGJ groups were 3.9% in 1993, 2.1% in 1992, 3.3% in 1991, and 4.3% in 1990. The highest group return on revenue was 5.1%, posted in 1988, the lowest 1.2% in 1986.

Return on stockholders' equity for group companies increased to 10.7% in 1995 from 9.4% in 1994. Return on stockholders' equity was 10.9% in 1993, 6.4% in 1992, 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.

The OGJ200's 1995 capital and exploration spending total was the highest group figure since the $56.2 billion of 1990, when the list contained 300 companies. The record high capital outlays for the OGJ list was $66.5 billion in 1983, when there were 400 companies on the list and the crude oil price crash of 1986 had not yet occurred.

Group operations

Except for drilling activity and U.S. liquids production, indicators of operating performance improved in 1995 for the OGJ200 companies.

The group's natural gas production and reserves moved up both worldwide and in the U.S. Worldwide liquids production and reserves also increased in 1995. U.S. liquids reserves increased marginally.

Group worldwide natural gas production moved up 2.3% to 16.3 tcf, the highest output since the OGJ400/300/200 was started. The increase outpaced that of the world at large-1.9%.

U.S. natural gas production by OGJ200 companies moved up 2% to 11.1 tcf. That compares with an increase in total U.S. marketed output of 1% to 19.8 tcf.

OGJ200 worldwide liquids production increased 0.4% in 1995 to 3.259 billion bbl despite a drop in U.S. liquids production of 1.2% to 1.828 billion bbl. The group's non-U.S. output was up 2.5% at 1.431 billion bbl.

In 1995, OGJ200 companies recorded gains in worldwide liquids reserves of 1.8% to 33.9 billion bbl, in non-U.S. liquids reserves of 4.1% to 14.6 billion bbl, and in U.S. liquids reserves of 0.13% to 19.365 billion bbl.

Group worldwide natural gas reserves increased 3.2% to 187.5 tcf in 1995. The increase included a 4.5% gain in the U.S. to 110.7 tcf and a 1.5% gain outside the U.S. to 76.8 tcf.

Changes in the group

This year's list contains four companies that didn't appear last year, when there were 17 new companies. The OGJ300 of 1994 contained 31 new companies.

The 1996 list includes four publicly traded limited partnerships (LPs). The largest is Hallwood Energy Partners with assets of $125.2 million. The smallest LP on the list, Enex Program I Partners, had assets of $4.8 million.

There are eight royalty trusts on the list and 17 subsidiaries of non-U.S. energy companies or of companies operating mainly in other industries.

The lowest-ranked company on this year's list had 1995 assets of $3,343,000, up from $100,000 last year and $84,000 the year before.

The asset value cut-off for the top 100 companies was $116.9 million, compared with $135.7 million last year. The reduction probably indicates consolidation of assets in the larger companies.

Top 20 companies

This year's top 20 companies, ranked by assets, includes one company that didn't appear last year: Pennzoil moved up to No. 20 from 21 the year before, swapping positions with Meridian Oil.

There was also some minor reshuffling of asset position. Coastal moved up one position to No. 13, swapping places with USX-Marathon. Ashland Oil also moved up one position to No. 17, swapping with Columbia Gas System.

The top 20 companies had total assets of $404.5 billion at yearend 1995, up from $400.8 billion for the top 20 last year and $393.4 billion the year before that.

The top 20 received revenues of $475.4 billion in 1995, up from $436.9 billion in 1994. This was 92.4% of total revenues for the OGJ200, up from 90.1% the previous year.

The collective net income of this year's top 20 was $18.2 billion, compared with $16 billion for the 1995 group and $16.4 billion for the 1994 group.

Net 1995 earnings for this year's top 20 amounted to 97.8% of the OGJ200 total.

Two of the companies in the top 20, Conoco and BP (USA), both subsidiaries of larger entities, do not report stockholders' equity. Stockholders' equity for the remaining 18 companies of the top 20 totaled $145.5 billion in 1995, 83.4% of the OGJ200 total.

Capital and exploration expenditures in 1995 by the top 20 group totaled $41.1 billion, up from $37.8 billion in 1994 and $38.3 billion in 1993. This was 76.4% of the OGJ200 total capital spending in 1995.

The top 20 drilled 4,147 net wells in 1995, down from 4,584 net wells in 1994 but still higher than the 3,788 net wells in 1993 and 3,599 net wells in 1992. In 1995 this was 45.1% of total wells drilled by the OGJ200 group of companies.

The biggest 20 companies accounted for 86.8% of the OGJ200's 1995 worldwide liquids production, 82.5% of U.S. liquids production, 73.4% of worldwide natural gas production, and 71.8% of U.S. natural gas production.

The top 20 companies hold 87% of the OGJ200 group's worldwide liquids reserves, 83.6% of U.S. liquids reserves, 77.5% of worldwide natural gas reserves, and 64.5% of U.S. natural gas reserves.

OGJ200 shares

The OGJ200 group's total revenue of $514.2 billion in 1995 was equal to 7.1% of U.S. gross domestic product (GDP).

As a share of U.S. totals, the group's liquids production was 60.2% and natural gas production 56.1%. The group represents 67% of total U.S. liquids reserves and 67.6% of the U.S. natural gas reserves.

The OGJ200 group holds 3.3% of worldwide liquids reserves and 3.8% of natural gas reserves. Its 1995 production amounted to 13.2% of worldwide liquids and 21.8% of worldwide natural gas.

Fastest growing companies

The OGJ200's growth ranking is based on stockholders' equity. To be ranked, companies must have had positive net income for 1995 and 1994 and net income growth in 1995. Subsidiary companies, newly public companies, and LPs are not included.

Most of the fastest growing companies posted large gains in net income in 1995. Ten of the 20 companies in the fastest-growing list had increases in net income of 100% or more. All but one of the companies posted earnings gains exceeding 10%.

The long term debt positions of the companies on the list were mixed. Ten of the companies increased long term debt, six decreased, and four were unchanged. Three companies had no long term debt.

Bellwether Exploration led the list this year. Its stockholders' equity moved up 147.4%, and net income increased 15.6% to $941 million in 1995. It was ranked 120 in total assets.

Five of the companies were on the fastest-growing list last year. Lomak Petroleum appeared for the sixth year in a row. Bellwether Exploration, Blue Dolphin Energy, and Golden Triangle Royalty & Oil were repeaters from last year.