Third Quarter 2009 Key Findings
• Eighteen major energy companies reported a 71-percent decrease in net income relative to the third quarter of 2008 (Q308). Further, this represents a 54-percent decrease relative to the third-quarter average for 2004-2008.
• The effects of lower oil and natural gas prices, worldwide refinery throughput, and domestic and European refining margins overwhelmed the effects of higher worldwide production of crude oil and natural gas and higher Asia/Pacific refining margins and led to lower revenues and net income.
• Domestic and foreign oil and natural gas production continued to rise despite much lower prices and earnings.
• Upstream capital expenditures by these companies declined but by much less than the fall in net income, while capital expenditures for refining/marketing decreased slightly despite a significant decline in net income.
The Energy Information Administration has released "Financial News for Major Energy Companies, Third Quarter 2009." "Financial News for Major Energy Companies (the News)" is a report on the recent financial performance of major U.S. oil and natural gas companies. The U.S. majors reported $13.8 billion of net income in the third quarter of 2009, which was 71-percent less than these companies reported for the third quarter of 2008 (and 54 percent lower than the third-quarter average over the 2004-2008 period, after adjusting for inflation).
Major Energy Companies Featured in Survey:
Anadarko Petroleum Corporation
Apache Corporation
BP p.l.c. (only U.S. operations included)
Chesapeake Energy Corporation
Chevron Corporation
ConocoPhillips
Devon Energy Corporation
EnCana Corporation (only U.S. operations included)
EOG Resources, Inc.
EQT Corporation (was Equitable Resources Inc.)
Exxon Mobil Corporation
Hess Corporation
Marathon Oil Corporation
Occidental Petroleum Corporation
Sunoco, Inc.
Tesoro Corporation
Valero Energy Corporation
Williams Companies, Inc., The
XTO Energy, Inc.
The leading operations, in terms of net income, for the U.S. majors during the third quarter of 2009 were foreign oil and natural gas production, domestic oil and natural gas production, and worldwide chemicals, which generated contributions to net income of $7.4 billion, $5.6 billion, and $1.2 billion, respectively. All of the lines of business of the U.S. majors tracked by the News recorded lower earnings in the third quarter of 2009 than during the third quarter of 2008.
Oil and Gas Operations of Major Energy Companies
• Worldwide oil and gas production income fell 63 percent ($26.9 billion) relative to Q308 as a decline in foreign returns was magnified by an even greater decline in income from domestic operations. The decline relative to the third quarter average for 2004-2008 was a slightly more modest 37 percent.
• Domestic oil and gas production operations generated 62 percent less income than a year earlier (39 percent less than the average for the third quarter of 2004-2008).
• Eight of the ten included companies reported lower earnings than a year ago, noting in their press releases that the effects of dramatically lower prices received overwhelmed the effects of higher production levels (due to the absence of hurricane effects and bringing new fields on-line) and lower operating costs.
• Income from foreign oil and gas production fell 51 percent compared to Q308 (23 percent relative to the third quarter average for 2004-2008).
• All 5 of the included companies reporting foreign production financial results reported lower earnings than a year ago as the effects of dramatically lower prices received more than offset the effects of higher production levels, according to company press releases.
Refining/Marketing Operations of Major Energy Companies
• Income from worldwide refining/marketing operations declined 96 percent ($9.3 billion) relative to Q308 as a large decline in domestic returns was magnified by a much smaller decline in income from foreign operations. The decline relative to the third quarter average for 2004-2008 was similar, 95 percent.
• Domestic refining/marketing operations generated a loss of 166 million, which was 103 percent less than both Q308 and the average for the third quarter of 2004-2008.
• Nine of the ten included companies reported lower earnings than a year ago, with four reporting a loss. Lower refining and retailing margins, lower throughput due to planned down-time and divestitures, and derivative losses were among reasons given for lower earnings in company press releases.
• Income from foreign refining/marketing fell 85 percent compared to Q308 (77 percent relative to the third quarter average for 2004-2008).
• All five of the included companies reported lower earnings than a year ago (with 2 reporting a loss) in an industry environment with lower European margins and diminished throughput. Additionally, the companies reported lower margins and diminished product sales (due to divestitures) in their press releases.
Capital Expenditures for Oil and Gas, and Refining/Marketing Operations of Major Energy Companies
• The majors’ upstream capital expenditures (capex) declined relative to Q308, but by one-third of the decline in net income for worldwide upstream, and was essentially the same as the third quarter average for 2004-2008. In particular, worldwide oil and gas production capital expenditures fell 35 percent relative to Q308, but was about 1 percent lower than the third quarter average for 2004-2008.
• The majors' investment in their U.S. oil and gas production operations declined 58 percent relative to Q308, but was only 19 percent lower than the third quarter average for the last five years (i.e., 2004-2008).
• Capital expenditures in foreign oil and gas production operations fell 14 percent in Q309 compared to Q308, but increased 11 percent relative to the third quarter average for 2004-2008.
• Despite the $9 billion decline in net income, worldwide refining/marketing investment by the majors only declined $196 million, in Q309 relative to Q308, but was 39 percent higher than the third quarter average for 2004-2008.
Gas and Power and Chemical Operations of Major Energy Companies
• Net income from the majors' gas and power operations fell 30 percent relative to Q308 (14 percent relative to the third quarter average for 2004-2008).
• Four of the six companies reporting earnings generated lower earnings. Factors such as lower sales prices, mark-to-market write-downs, and increased pipeline operating and maintenance costs were reported in company press releases.
• Worldwide chemical operations generated 16 percent less for the majors in Q309 than in Q308 (12 percent less than the third quarter average for 2004-2008).
• Three of the five companies reporting chemical results reported lower earnings with one reporting a loss. These companies overwhelmingly attributed lower earnings to lower margins and, to a lesser extent, lower sales, in company press releases. The companies reporting higher earnings are partners in a chemical joint-venture and reported reduced utility costs, which more than offset lower margins.
Supplemental Figures
• Crude oil prices in Q309 were 42 percent lower than in Q308 and 9 percent less than the average for the third quarter of 2004-2008 (in Q309 dollars).
• U.S. crude and NGL production increased 20 percent compared to Q308 due to new fields starting operations and the absence of hurricane effects, which significantly reduced production in Q308. Further, the level of Q309 was 10 percent higher than the third quarter average for 2004-2008.
• Foreign crude oil and NGL production increased 7 percent compared to Q308 due to both entitlement effects of production-sharing agreements and newly opened fields. The level of Q309 was 2 percent higher than the third quarter average for 2004-2008.
• Natural gas prices of Q309 were 64 percent lower than in Q308 and 56 percent lower than the third quarter average for 2004-2008 (measured in Q309 dollars).
• U.S. gas production by the majors increased 5 percent relative to a year earlier and was 14 percent higher than the average for the third quarter of 2004-2008.
• Foreign gas production by the majors increased 3 percent relative to a year earlier and was 7 percent higher than the third-quarter average for 2004-2008.
• The gross refining margin for Q309 was 77 percent lower relative to Q308 and 80 percent lower than the third-quarter average for 2004-2008 (in Q309 dollars).
• Domestic refinery throughput was essentially unchanged relative to Q208, rising 0.2 percent, and was 3 percent lower than the average for the third quarter of 2004-2008.
• Foreign refinery throughput decreased 4 percent relative to Q308 and was 6 percent lower than the third quarter average for 2004-2008.
All dollar figures and comparisons are in constant third-quarter 2009 dollars.