OGJ100 2019 financial results weighed down by lower commodity prices

OGJ100 companies’ 2019 financial results were weighed down by lower oil and gas prices and weaker industrial margins. Canadian firms as a subgroup, however, reported increased net earnings due to narrowed crude differentials.

Oil & Gas Journal’s look at the leading 100 oil and gas producing companies based outside the US allows for comparison of the size and results of the entities. For many of the national oil companies in the report, though, no such information on assets, revenues, earnings, or capital expenditures is available. Companies in OGJ100 are grouped by regions according to the location of their corporate headquarters.

All financial results in this report are indicated in US dollars. Due to exchange rate variation, the changes of financial results can be significantly affected when translated into US dollars.

Canadian producers

A sample of 19 Canadian companies included in this year’s OGJ100 reported a combined net income of $6.36 billion in 2019, compared to net income of $3.3 billion for the same group a year earlier. EnCana Corp., included in the previous OGJ100 list, moved to the US and became Ovintiv (now included in the OGJ150 list).

For Canadian producers, average price realizations in 2019 were higher than the prior year due to the improved heavy-light crude oil differential and the impact of a weaker Canadian dollar, partially offset by a decrease in the WTI benchmark price.

During 2018, the Canadian oil industry faced wider than normal crude oil differentials due to continued delays in new market egress from the Western Canadian basin. In response to wider differentials, the government of Alberta implemented, effective Jan. 1, 2019, mandatory production curtailments. In 2019, light/heavy differential for WTI at Cushing less WCS at Hardisty was $12.8/bbl in 2019, compared to $26.3/bbl in 2018.

The higher earnings of Canadian firms in 2019 also reflected a decrease in the provincial corporate income tax rate enacted by the government of Alberta from 12% to 11%, effective July 1, 2019, with a further 1% rate reduction every year on Jan. 1 until the provincial corporate income tax rate reaches 8% on Jan. 1, 2022.

Canadian Natural Resources reported net earnings of $4 billion for 2019, compared with $2 billion for 2018. Excluding special items, adjusted net earnings from operations for 2019 were $2.86 billion compared with $2.5 billion for 2018.

Suncor Energy’s net income was $2.18 billion in 2019, compared to $2.54 billion in 2018, and $3.43 billion in 2017. Included in 2019 results are after-tax non-cash asset impairment charges of $2.52 billion.

Combined, the Canadian group’s assets at yearend 2019 increased 2.7% to $248.6 billion from $242 billion at yearend 2018. Suncor Energy holds the most assets of the group, followed by Canadian Natural Resources and Imperial Oil Ltd.

The Canadian group’s collective capital expenditures in 2019 decreased by 9% to $15.5 billion from $17 billion a year ago, reflecting stricter capital discipline and production curtailments.

European companies

Total assets of the European group totaled $2.37 trillion at yearend 2019, up 7% from yearend 2018. Ranked by yearend 2019 assets, Shell is the largest of the European companies in the OGJ100, followed by OAO Gazprom, BP, and Total SA. Shell is also No.1 by assets for the whole OGJ100 group.

The OGJ100 companies based in Europe recorded a 30% decrease in collective net income in 2019, mainly driven by lower realized oil and gas prices, higher impairments, and lower downstream margins. On the other hand, the group’s metrics were impacted by a slight appreciation of the dollar against the euro.

Shell’s net income was $16.4 billion in 2019, compared with $23.9 billion in 2018. BP’s profit for 2019 was $4.19 billion, compared with $9.58 billion in 2018. BP’s 2019 results included a net charge for non-operating items of $7.2 billion. Repsol YPF SA reported a loss of $4.3 billion for 2019 with major write downs in fourth-quarter 2019.

The European group’s collective capital spending dropped 7% in 2019 from a year ago.

Latin America producers

Petroleo Brasileiro SA (Petrobras) reported a net income of $10.36 billion in 2019, a 40% increase from the 2018 level, mainly as a result of capital gains on divestments, partially offset by higher financial expenses associated with liability management, higher impairments, and lower Brent prices.

With crude oil export prices moving lower and production/exports missing target, Petroleos Mexicanos (Pemex) reported a net loss of $18 billion for 2019, after a net loss of $9.16 billion reported in 2018.

Asian companies

PetroChina Co. Ltd. is the largest of the Asia Pacific companies in the OGJ100 by assets, followed by Petronas and CNOOC.

PetroChina’s net income decreased by $1.5 billion in 2019 compared to a year ago, while its capital expenditure increased by 11%, or $4.3 billion.

Despite drop of more than 10% in international oil prices, CNOOC reported net income of $8.8 billion for 2019, up from $7.9 billion for 2018, thanks to production growth and effective cost control.

Petronas reported net income of $9.78 billion for 2019, down from $13.72 billion for 2018, due to lower oil and gas prices.

Middle East companies

Saudi Aramco made a profit of $88 billion for 2019, compared to $111 billion for 2018. The company is No.2 by assets for the entire group.