First-half 1999 earnings for Oil & Gas Journal's sampling of US and Canadian oil and gas companies declined significantly from the same period last year (Second Quarter financial results - Page 1Page 2).
The rise in crude oil prices came too late in 1999 to prevent the drop in profits for the first half, and natural gas prices were below first-half 1998 levels.
Slightly higher demand for petroleum was not enough to offset the effects of weak prices, as both revenues and profits for the group of 105 companies were down from first-half 1998. Total profits for the survey group were off 28% in the first half compared with a year ago, while total revenues were down only 2%.
Of those sampled, 37 companies recorded an increase in profits over first-half 1998. Twenty-eight saw their profits drop from the same period last year. And another 39 companies posted losses. Of these, 28 had also posted losses in the first half of 1998.
Demand, prices
According to the International Energy Agency, Paris, worldwide oil demand averaged 74.8 million b/d for the first half of 1999, up from 73.9 million b/d for the first half of 1998.
As a result of cutbacks in oil production, mainly from members of the Organization of Petroleum Exporting Countries, worldwide supply of oil was more than 2 million b/d lower for the period, at 74.0 million b/d vs. 76.3 million b/d in first-half 1998.
Higher demand, coupled with a decline in production, led to a recovery in petroleum prices that is continuing. After dipping to a low of $9.57/bbl in December 1998, the average price for world export crude oils was $12.97/bbl for first-half 1999, up slightly from an average of $12.39/bbl for the first 6 months of 1998. In the US, the first-half average posted price for West Texas Intermediate crude oil was $14.08/bbl, down from $15.21/bbl a year earlier.
The New York Mercantile Ex- change natural gas futures price slid from an average price of $2.24/MMbtu in first-half 1998 to $2.02/MMbtu for first-half 1999. The average spot price for natural gas was $1.88/MMbtu vs. $2.11/MMbtu a year earlier.
Earnings
OGJ's survey included a group of 57 large independent oil and gas companies. This group recorded small gains in revenues, up only 9% from the first half of last year, while net profits were $187.4 million vs. a combined loss of $339.3 million for the same period in 1998. Of these large independents, 16 had higher profits in the first half, while 7 turned losses into profits, 10 posted lower earnings, and 24 recorded losses for the period.
The improvement in results for this group was greater in the second quarter, when net profits totaled $102.8 million vs. a loss of $728.4 million for second-quarter 1998. Second-quarter revenues for the group rose to $9.5 billion vs. $8.0 billion last year. Twenty of the large independents posted losses for the period vs. 26 in second-quarter 1998.
The survey also included 23 smaller independent companies. Overall, this group's profits for the first 6 months of 1999 were $4.9 million, down from $8.6 million for first half 1998. This drop came despite nearly unchanged revenues. Of this group of companies, 10 posted losses for the first half vs. 12 last year.
Second-quarter profits were better for the group of small independents, however, jumping to $5.1 million compared with a loss of $2.2 million in 1998. Revenues were up slightly to $115.5 million vs. $103.2 million in the second quarter last year. Ten posted losses for the period vs. 13 in second-quarter 1998.
The 19 integrated companies surveyed showed a similar drop in profits for the first half. Net profits for the period dropped to $6.2 billion from $9.3 billion in 1998. For many of these companies, the decline in earnings was partly driven by depressed refining margins and lower worldwide natural gas prices.
Profits moved up for only three of these integrated oil and gas companies. Eleven had lower profits, one turned a loss into a profit, and four recorded losses for the period.
In the second quarter, the group of integrated companies posted net profits of $3.6 billion vs. $4.5 billion last year. Revenues were up, however, to $90.7 billion vs. $86.8 billion in second quarter 1998.
No losses were reported in this group for the second quarter vs. two for second quarter 1998.
The survey also included six independent refining companies. For this group, profits increased 36% year-on-year for the first half, but individual performances were mixed. Three of the companies saw earnings drop, while the other three recovered from losses in the previous year to post earnings for first-half 1999.
In the second quarter, the group of six refiners posted profits of $3.9 billion, essentially unchanged from second quarter 1998. Revenues were up slightly at $111.8 billion vs. $105.1 billion last year.
One refining company reported a loss in the second quarter, as did one in second quarter 1998.
