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Slowdown in income for energy firms
Alan Bailey For Petroleum News
Upstream gained while downstream lost seemed the message in the U.S. Energy Information Administration’s “Financial News for Major Energy Companies, Second Quarter 2008” report released Aug. 21.
The income figures for major U.S. energy companies when comparing the second quarter of 2008 with the same period in 2007 demonstrate how escalating oil prices drove up production profits while squeezing the margins in activities such as oil refining and the retail sale of oil-based products — crude oil increased in price from $62 per to $115 per barrel while the wellhead gas price increased from $6.89 to $9.86 per thousand cubic feet between the two periods.
“The effects of higher oil and natural gas prices overwhelm lower worldwide oil production and worldwide refining margins,” the report said.
Operating costs up However, the report noted that increased operating costs also contributed to the pressure on margins in downstream industries.
In total for all companies included in the EIA analysis, there was a $12.2 billion or 50 percent increase in net income from worldwide oil and natural gas production. But that increase was offset by an $11.9 billion or 78 percent reduction in net income from refining, marketing, gas, power operations and chemical operations, the report said. The net result was a slight decline in overall net income from $38.8 billion to $30.4 billion between the two quarters.
Total revenues increased by 44 percent to $423.4 billion, resulting in a reduction in return on sales (net income divided by revenue) from 10.5 percent to 7.2 percent.
Positive longer term However, a glimpse at a longer time horizon showed the more positive business climate for energy companies that people would expect in the world of high energy prices — the second quarter 2008 net income figure was 31 percent higher than the second quarter average for the period 2003 to 2007, the report said.
The data came primarily from 19 U.S. companies: Anadarko Petroleum, Apache, Chesapeake Energy, Chevron, ConocoPhillips, Devon Energy, El Paso, EnCana U.S. operations, EOG Resources, Equitable Resources, ExxonMobil, Hess, Marathon, Occidental Petroleum, Sunoco, Tesoro, Valero Energy, The Williams Companies and XTO Energy. Some data also came from the U.S. lines of business of BP and Shell.
The “Financial News for Major Energy Companies, Second Quarter 2008” report is on the Web at www.eia.doe.gov/emeu/perfpro/news_m/q208.pdf
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