Earnings slide, profits rise

Independents drop 20% in second quarter; profits for Pioneer, Evergreen

Petroleum News Houston Staff

The leading U.S.-based independents could see more than a 20 percent decline in 2003 second-quarter earnings compared to the first quarter, due almost entirely to an erosion in oil and gas prices.

Still, profits for the second quarter ending June 30 should be about 45 percent higher than the year-ago quarter when commodity prices were languishing, according to a Petroleum News survey based on Thompson/First Call estimates for 15 exploration and production companies.

Earnings projections for the 2003 third quarter are flat to second-quarter estimates, reflecting uncertainty over factors that can dramatically influence U.S. natural gas prices, including weather.

Second-quarter estimates reflect an average gas price of $5.40 per million cubic feet and an average oil price of $29 per barrel, compared to a more robust first-quarter average of $6.59 per million cubic feet for gas and $34 per barrel for oil.

Companies surveyed by Petroleum News during the week of July 13 are Devon Energy, Anadarko Petroleum, Burlington Resources, Apache, Kerr-McGee, Noble Energy, Unocal, XTO Energy, Pioneer Natural Resources, Chesapeake Energy, EOG Resources, Forest Oil, Tom Brown, Newfield Exploration and Evergreen Resources.

Pioneer, Evergreen, Chesapeake could show increases

Barring reporting surprises, Pioneer, Chesapeake and Evergreen were the only companies in the group expected to post earnings gains for the 2003 second quarters versus the previous quarter.

Pioneer, which has been steadily adding production from discoveries in the Gulf of Mexico, could see a second-quarter profit of 72 cents per share compared to 58 cents per share in this year’s first quarter. The company posted just 13 cents per share in the 2002 second quarter.

Evergreen, which is expected to boost natural gas production this year by 15 percent over last year to 126,000 million cubic feet per day, is expected to report second-quarter earnings of 95 cents per share compared to 90 cents per share in the previous quarter and 17 cents per share in the year-ago period.

On the strength of both property acquisitions and success with the drill bit, Chesapeake should weigh in with second-quarter earnings of about 26 cents per share, compared to 23 cents per share in the prior quarter and 13 cents per share for the 2002 second quarter.

Declines range from sharp to modest

Similarly, Noble Energy’s profit could fall by 39 percent from 71 cents per share in the first quarter to 43 cents per share in the second quarter, according to Thompson/ First Call consensus estimates. Kerr-McGee could be looking at a 33 percent drop in profit from $1.20 per share in the first quarter to 80 cents per share in the second quarter, while EOG’s profit was expected to decline 34 percent to 82 cents per share from $1.25 per share.

Newfield, a major natural gas producer on the Gulf of Mexico’s continental shelf, could see a 27 percent decline in earnings from $1.20 per share in the first quarter to 88 cents per share in the second quarter.

U.S. Rockies producers Forest and Tom Brown could experience earnings declines of 23 and 29 percent, respectively. Forest’s profit was expected to drop to around 56 cents per share in the second quarter from 73 cents per share in the first quarter, while Tom Brown’s profit could slide to 36 cents per share from 51 cents per share.

Meanwhile, Unocal and Anadarko likely will see more modest earnings declines of 22 and 16 percent, respectively. Unocal’s profit was expected to fall to 68 cents per share in the second quarter from 87 cents per share in the first quarter, while Anadarko’s profit was expected to slide to $1.22 per share from $1.45 per share.

Largely because of its aggressive hedging strategy, big natural gas producer XTO also is looking at a modest 5 percent slide in earnings from 39 cents per share in the first quarter to 37 cents per share in the second quarter.