Bob BeckHigher crude oil and natural gas prices helped boost 1996 earnings sharply for U.S. and Canadian oil and gas companies.
Associate Managing Editor-EconomicsLaura Bell
Statistics Editor
Revenues and profits were significantly higher than in 1995 for most companies. Fourth quarter profits and revenues were particularly strong.
A sample of 124 company earnings reports shows that profits were up from a year ago for 102 of the companies, while eight of the companies posted lower earnings and 14 recorded losses. However, for the latter group, 10 of the companies posted smaller losses than a year earlier.
Total profits for this sample group of companies were up 61.9% from earnings in 1995, while revenues moved up 14.1%. In fourth quarter 1996, profits for the group were up 240.7% from the same period a year earlier. Revenues in the fourth quarter were 23% higher than the year before.
Higher prices, demand
Significant increases in crude oil and natural gas prices were the major contributors to the improvement in earnings.
The average price for world export crude oil averaged $20.04/bbl in 1996, up 19.5% from 1995. The average price for West Texas intermediate crude oil was up 20.6% at $21.23/bbl, and the futures price for light sweet crude oil on the New York Mercantile Exchange (Nymex) averaged $22.01/bbl, up 19.8% from 1995.
The Nymex natural gas price averaged $2.52/MMBTU, up 49.4% from a year earlier. The average U.S. spot natural gas price for 1996 was $1.99/ MMBTU, up 32.7% from 1995.
The higher prices were accompanied by higher demand for oil products and natural gas in 1996.
The International Energy Agency estimated that North American petroleum product demand averaged 20.4 million b/d in 1996, up 3% from 1995. Much of the increase was in the U.S.
U.S. demand for petroleum products averaged 18.234 million b/d in 1996, up 2.9% from 1995 and the highest level since 1979. It was also the third highest level of consumption on record.
U.S. natural gas consumption moved up 2.2% to a near-record 22.065 tcf. This was the second highest gas consumption level, surpassed only by the 22.101 tcf in 1972.
Majors vs. independents
For the 22 large integrated companies in the sample, profits for the year were up 55.2% and revenues gained 12.5% from 1995.
Nineteen of these companies posted higher earnings during 1996, while two had lower profits. One, Sun Co. Inc., had a loss of $115 million.
In the fourth quarter, this group of integrated companies posted profits 153.3% higher than in fourth quarter 1995. Fourth quarter revenues were 20.7% higher.
The sharpest gains in earnings were recorded by some of the large independent companies. Total profits for this group of 69 companies were up 154.9%, with increased revenues of 26.1%. Profits for fourth quarter 1996 were $1.3 billion compared with a loss of $181 million in the same period of 1995. Fourth quarter revenues were up 36.2%.
Most independents in the sample, 61, recorded higher profits during 1996 than in 1995. Profits slipped for four of the companies, and while four others posted losses, two of the latter trimmed their losses from a year earlier.
The sample also included 28 smaller independent companies, of which 21 showed higher profits this year, while seven recorded losses-although for the latter group, six of the companies had smaller losses than in 1995.
As a group, small independents' 1996 earnings were $68.1 million compared with a loss of $34 million in 1995. Revenues for this group moved up 46.6%.
The sample of earnings reports also included five refining and petrochemical companies. This group did not fare as well. Profits were down 16.2% in 1996 even though revenues increased 22%. This reflected the slim margins that have plagued the refining and petrochemical business during the past year.
