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Petroleum industry

Earnings from Exploration and Production Activities Plummet at Major US Oil Companies

Strategic Insights

— 2 min read

Low crude oil prices battered major US oil companies in the first quarter, driving earnings from exploration and production (E&P) operations down 23% from last year's level. Only three of 18 companies in The Oil Daily's survey of upstream operations emerged unscathed from a price decline that left crude prices almost $5/bbl below their level for the first quarter of 1993. Total earnings for the 18 largest oil companies dropped to $2.3 billion in the first quarter, down from $3.1 billion in the year-earlier period. Profit margins for the group fell 26% to an average $1.98/bbl from $2.66/bbl a year ago.

Despite modest increases in crude and natural gas production, most companies were hit hard by the weak prices, with domestic producers almost totally dependent on upstream revenues bearing the brunt. Companies that posted significant losses in the E&P sector include Occidental Petroleum Corp., Kerr-McGee Corp., the Marathon Group, Atlantic Richfield Co. (Arco), and Unocal Corp. However, some companies managed to post increases due to strategic cost-cutting measures and increased international production. Amoco Corp.'s writedown in the Congo helped improve its upstream operations, while Murphy Oil Corp. benefited from a 45% increase in crude oil and gas liquids production.

Key Takeaways:

  • Earnings from exploration and production activities at major US oil companies fell 23% in the first quarter of 1994 due to low crude oil prices.
  • Total earnings for the 18 largest oil companies dropped to $2.3 billion in the first quarter, down from $3.1 billion in the year-earlier period.
  • Profit margins for the group fell 26% to an average $1.98/bbl from $2.66/bbl a year ago.
  • Only three out of 18 surveyed companies, Amoco Corp., Ashland Oil Inc., and Murphy Oil Corp., posted increases in upstream earnings.
  • Domestic producers, such as Marathon Group and Unocal Corp., were among the hardest hit, with over 200 stripper and marginal wells shut in due to low crude prices.
  • Unocal Corp. expects total natural gas production to average 1.8 Bcfd for 1994, up nearly 13% from the 1993 level.
  • Unocal aims to increase worldwide gas production to almost 2 Bcfd by 1996, driven by higher production from the Gulf of Mexico and Thailand.
  • Natural gas development in the Far East is Unocal's first priority, according to analyst Paul D. Mlotok of Morgan Stanley & Co.

Statistics:

  • Total earnings from exploration and production activities at major US oil companies: $2.3 billion (Q1 1994), down from $3.1 billion (Q1 1993)
  • Average profit margin for the group: $1.98/bbl (Q1 1994), down 26% from $2.66/bbl (Q1 1993)
  • Crude oil production: 7.7 million b/d (Q1 1994), up 3% from Q1 1993
  • Natural gas production: 32.6 Bcfd (Q1 1994), up 2% from Q1 1993
  • Average domestic price of crude oil: $7.83/bbl (Arco, Q1 1994), down from $12.31/bbl (Q1 1993)

Sources:

  • The Oil Daily
  • Amoco Corp.
  • Ashland Oil Inc.
  • Murphy Oil Corp.
  • Unocal Corp.
  • Morgan Stanley & Co.
  • Dean Witter Reynolds Inc.

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