Revenues decline 39% in 1Q2015, net income plummets by $36 billion

DON STOWERS, CHIEF EDITOR - OGFJ
LAURA BELL, STATISTICS EDITOR - OIL & GAS JOURNAL

AS WE ANALYZE FINANCIAL REPORTS from the OGJ150 group of companies for the first quarter, it's hard not to think of the RMS Titanic, the British passenger liner that sank in the North Atlantic Ocean in 1912. As with the Titanic, there are survivors, but there is no denying the low-price environment has been a disaster for many US oil and gas producers. While there has been no loss of life we can attribute to the current industry downturn, it has been financially devastating to a number of companies.

The combination of high drilling costs in unconventional resource plays and low commodity prices has been deadly for many, especially highly leveraged companies that are straining just to keep up. As part of this quarterly column, OGFJ typically publishes a ranking of the 20 fastest-growing companies as measured by growth in stockholders' equity. It is telling that we have no such ranking for 1Q2015.

There have been some notable bankruptcies filed this year, but it's still too early to count casualties and survivors. With oil prices hovering around $50/bbl as this issue of OGFJ goes to press and with the prospect of more oil being added to already-saturated global markets in the wake of the just-concluded nuke deal with Iran, the worst may not be behind us. In the past week, the US rig count actually went up again. The questions producers are struggling with are:

How low can oil prices go?

When will we see a real recovery?

How long will it be before we reach a price point that will make us economically viable again?

What can we do to protect our investments in the meantime?

Total revenues for the group of publicly-traded US-based companies tracked by Oil & Gas Journal and Oil & Gas Financial Journal declined by 39% in the first quarter of 2015 compared with the first quarter of 2014 and by 27% compared with the previous quarter (4Q14). This marks the third consecutive quarter of declining revenues. We have not seen revenues increase since the second quarter of 2014.

Net income plummeted in the first quarter. It fell by more than $36 billion for the entire group of companies compared with the same quarter in 2014. It dropped by $17.7 billion in three months, from the 4Q14 to 1Q15. The balance sheet for the group of producers covered by the OGJ150 Quarterly Report showed a collective net loss of nearly $15.2 billion in the quarter. This was the second consecutive quarter of declining net income for the group.

Aside from the Big Three - ExxonMobil Corp., Chevron Corp., and ConocoPhillips - it is hard to find companies that earned a profit during the first quarter. An unprecedented number of OGJ150 firms saw a net loss, including super-independents such as Anadarko Petroleum, Apache Corp., Devon Energy, and Chesapeake Energy. The four energy companies collectively suffered approximately $15.2 billion in net losses for the quarter, while the Big Three companies combined for a relatively modest gain of nearly $8 billion in net income - more than $5 billion from ExxonMobil.

The number of reporting companies increased slightly from 122 to 124 in the first quarter, and 12 companies covered in the OGJ150 failed to report their earnings to the US Securities Exchange Commission by press time for this issue.

Year-to-date capital spending in the 1Q15 stood at approximately $47.7 billion compared to $49.3 billion in the first quarter of 2014, about a 4% decline.

Total asset value for the OGJ150 group of reporting companies fell by $14.7 billion (about 1%) to $1.42 trillion in the first quarter compared to the same quarter in 2014. However, the decline was even more pronounced compared to the preceding quarter (4Q14) as total asset value dropped by more than $55.3 billion (about 4%) during that three-month period.

Stockholders' equity for the group declined by $8.7 billion (about 2%) in 1Q15 compared to the fourth quarter of 2014. It decreased by nearly $24 billion (4%) compared to the same quarter last year. Total stockholders' equity for the 124 reporting companies stood at nearly $686.3 billion in the first quarter.

LARGEST IN NET INCOME

The top 20 companies ranked according to net income had a terrible quarter financially. The largest 20 companies saw collective net income decline by $14.1 billion to just $8.9 billion in the first quarter compared to the same period last year - a 62% drop. Net income fell by nearly $8.3 billion from the previous quarter - down 49%.

Typically, the list of top 20 companies in net income is fairly consistent from one quarter to the next with perhaps two, three, or four companies dropping off the list to be replaced by newcomers. The first quarter of this year saw a real shake-up as 14 companies from the prior quarter dropped off the list: Marathon Oil Corp.; QEP Resources; Chesapeake Energy; EOG Resources; Pioneer Natural Resources; BreitBurn Energy Partners; Noble Energy; Murphy Oil Corp.; Denbury Resources; Newfield Exploration; SM Energy; SandRidge Energy; Halcon Resources; and Laredo Petroleum.

It's easier to list the six companies that remained on the top 20 list: No. 1 ExxonMobil ($5.1 billion in net income); No. 2 Chevron ($2.6 billion in net income); No. 6 Southwestern Energy ($78 million in net income); No. 8 WPX Energy ($68 million in net income); No. 11 Range Resources ($27.7 million in net income); and No. 13 Ultra Petroleum ($25.2 million in net income).

ConocoPhillips ($286 million in net income) returned to the top 20 in the No. 4 spot after falling out in the fourth quarter of 2014. Conoco is typically in the No. 3 slot behind ExxonMobil and Chevron, but the company fell to fourth place in the first quarter.

Newcomers to the top 20 in net income include: No. 3 Kinder Morgan CO2 Co. LP ($336 million); No. 5 EQT Production ($185.8 million); No. 7 Consol Energy ($76 million); No. 9 Cabot Oil & Gas ($40.3 million); No. 10 Wexpro ($27.7 million); No. 12 Gulfport Energy ($25.5 million); No. 14 PDC Energy ($17.1 million); No. 15 Sabine Royalty Trust ($14.6 million); No. 16 Concho Resources ($7.5 million); No. 17 San Juan Basin Royalty Trust ($6.8 million); No. 18 Diamondback Energy ($6.4 million); No. 19 Synergy Resources ($4.7 million); and holding down the final No. 20 spot - Chaparral Energy ($4.2 million;).

LARGEST IN TOTAL REVENUE

As you might expect, the top 20 companies in total revenue saw huge declines that are in keeping with the precipitous drop in net income. Collectively, the group had $135.5 billion in total revenue for the first quarter compared to $223.2 billion for the same quarter in 2014. The $87.7 billion drop represents a 40% decline for the period. Total revenue for the group dropped by $47.2 billion from $182.7 billion in the previous quarter - down 26%.

Three companies fell from the top 20 list from the previous quarter - Freeport McMoran Inc., Range Resources, and QEP Resources. They were replaced by Linn Energy LLC with $916.5 million in total revenue; Whiting Petroleum Corp. with $529.2 million in total revenue; and EQT Production with $502.2 million in total revenue.

ExxonMobil again led the group with $67.6 billion in total revenue, followed by Chevron Corp. in second place with $34.6 billion in revenue. ConocoPhillips came in at third with $8.1 billion in total revenue.

Remaining companies in the top 20 in total revenue include No. 4 Devon Energy ($3.3 billion); No. 5 Occidental Petroleum ($3.1 billion); No. 6 Chesapeake Energy ($2.8 billion); No. 7 Anadarko Petroleum ($2.3 billion); No. 8 EOG Resources ($2.3 billion); No. 9 Apache Corp. ($1.8 billion); and No. 10 Hess Corp. ($1.6 billion).

The second 10 include the following companies: No. 11 Marathon Oil Corp. ($1.5 billion); No. 12 Southwestern Energy ($933 million); No. 13 Murphy Oil ($922 million); No. 14 Linn Energy ($917 million); No. 15 Pioneer Natural Resources ($868 million); No. 16 Noble Energy ($759 million); No. 17 Continental Resources ($626 million); No. 18 WPX Energy ($572 million); No. 19 Whiting Petroleum ($529 million); and bringing up the final spot - EQT Production with $502 million.

TOP SPENDERS

Collective spending by the top 20 companies in the first quarter of 2015 fell to $38.4 billion, a decline of nearly $2.2 billion (year to date). This represents about a 6% decrease over the same quarter in 2014.

Top spenders were, in order, Chevron ($7.6 billion); ExxonMobil ($7.2 billion); ConocoPhillips ($3.3 billion); Anadarko ($2.0 billion); Apache Corp. ($1.8 billion); Devon Energy ($1.7 billion); Occidental Petroleum ($1.7 billion); Marathon Oil ($1.5 billion); EOG Resources ($1.4 billion); Chesapeake Energy ($1.3 billion).

Bringing up the second 10 in spending is No. 11 Continental Resources ($1.3 billion), followed by No. 12 Hess Corp. ($1.2 billion); No. 13 Noble Energy ($1.1 billion); No. 14 Freeport McMoran ($1.0 billion); No. 15 Whiting Petroleum ($1.0 billion); No. 16 Murphy Oil ($824 million); No. 17 Concho Resources ($791 million); No. 18 Pioneer Natural Resources ($658 million); No. 19 SM Energy ($545 million); and No. 20 Newfield Exploration ($511 million).

MARKET CAPITALIZATION

Collective market capitalization for the top 20 companies on the OGJ150 list has fallen by $259.6 billion (21%) from the 1Q2014 to the 1Q2015, according to parent company data. Market capitalization has declined by $92 billion (9%) from the prior quarter.