The first quarter 2009 financial performance of many U.S. energy companies, particularly oil and natural gas producers, was much weaker than in the recent past. Every quarter, EIA reports on the financial performance of U.S. energy companies that together represent about half of U.S. oil and gas production. Our reports exclude companies that don’t issue quarterly releases and those that don’t separate out their U.S. operations from their overseas activities.
First quarter earnings by oil and natural gas producers fell sharply as much lower oil and gas prices affected the companies’ financial statements. Based on data available at the time of the publication of the quarterly reports, crude oil prices averaged $40.13 per barrel in the first quarter of 2009 (Q109), down by more than half from the peak average of $118.04 per barrel recorded in Q208. (All prices and price changes are in constant Q109 dollars.) Natural gas wellhead prices averaged $4.35 per thousand cubic feet (Mcf) in Q109, compared to a peak average of $10.04/Mcf in Q208
The “majors,” primarily the large integrated and large independent producers that report on EIA’s Financial Reporting System survey, reported losses of $1.3 billion in Q109 for the oil and gas production segment (Figure 1). This loss was in comparison to $30.8 billion of upstream net income in Q108 and was the first net loss recorded by the majors collectively since at least the fourth quarter of 1999, which is the earliest period for which EIA has quarterly data. Independent producers (non-majors) reported losses totaling nearly $2.7 billion in Q109 (Figure 2). Reported net income of the majors and independent producers reflected write-downs of the value of their oil and gas reserve assets
Figure 1. Producers Report Net Loss, Refiners' Earnings Increase (Billions of Constant Dollars)
Figure 2. Oil Field Companies' Earnings Decline, Producers Report Losses (Billions of Constant Dollars)
After rising substantially in the third and fourth quarters of 2008, capital expenditures reported by major oil and gas producers declined in Q109, falling to just below the level of Q108 (Figure 3).
Figure 3. Majors' Capital Expenditures Decline in Q109 (Billions of Constant Dollars)
While the reduction in capital expenditures raise some concerns about future reserve additions and production, oil and natural gas production in Q109 continued to show growth (Figure 4 and Figure 5). For the first time since Q104, the reporting companies’ aggregate domestic oil production, foreign oil production, domestic natural gas production, and foreign natural gas production all increased over the comparable quarter in the prior year. Only domestic oil production in Q109 remained below the average of the prior five first quarters. The increase in production, despite the sharp drop in capital expenditures, is a result of the lagged effects of higher capital expenditures in previous quarters based on relatively high prices.
Figure 4. Majors' Oil Production Increases (Million Barrels per Day)
Figure 5. Majors' Natural Gas Production Increases (Billion Cubic Feet per Day)
Refining and marketing was the majors’ only business segment that saw an increase in net income in the first quarter of 2009. Worldwide refining/marketing net income increased 83 percent between Q108 and Q109, although it remained 31 percent below the first-quarter average for 2004-2008 (Figure 1). Petroleum product prices fell by less than the decline in crude oil prices, resulting in a much larger gross refining margin in Q109.
Oil field company net income dropped 22 percent in Q109 from Q108, but was still 19 percent higher than the first-quarter average for 2004-2008 (Figure 2). Rig counts fell sharply, reflecting the decline in prices and producer earnings, but oil field companies did not have the impairment losses that affected producers.
For more information, see the Financial News for Major Energy Companies, First Quarter 2009 and the Financial News for Independent Energy Companies, First Quarter 2009.
U.S. Gasoline and Diesel Prices Continue to Climb
For the seventh consecutive week, the national average price for regular gasoline increased, moving up five cents to $2.67 a gallon. Despite a cumulative increase of 62 cents over those seven weeks, the price was $1.41 below the average a year ago and $1.44 below the all-time high set on July 7, 2008. With the exception of the Midwest, prices increased in every region throughout the country. On the East Coast, the price gained eight cents to reach $2.62 per gallon. In contrast to last week, when the price in the Midwest gained the most of any region, this week the price there slipped two cents to settle at $2.69 per gallon. At $2.53 per gallon, the average price on the Gulf Coast remained the lowest of any region. In the Rocky Mountains, the price rose six cents to $2.57 per gallon. The price on the West Coast shot up over nine cents to $2.90 per gallon. In California, the average price jumped nine cents to $2.98 per gallon.
The national average price of diesel fuel rose for the sixth week in a row, jumping seven cents to $2.57 per gallon. That price was $2.12 below the price a year ago and $2.19 less than the all-time high price recorded on July 14, 2008. Prices in all regions of the country increased. On the East Coast, the price jumped about nine cents to $2.60 per gallon. The average price in both the Midwest and Gulf Coast rose seven cents to $2.55 and $2.54 per gallon, respectively. The average price in the Rocky Mountains went up eight cents to $2.52 per gallon, the lowest of any region. The West Coast had the smallest increase of any region, moving up a nickel to $2.66 per gallon. In California, the price rose six cents to $2.73 per gallon.
Propane Build Moderately Higher
Primary inventories of propane moved moderately higher last week, posting a 0.8 million-barrel build that placed the Nation’s inventories of propane at an estimated 53.5 million barrels as of June 12, 2009. Nearly all of the weekly build occurred in the Midwest where imports contributed to push inventories up by 0.9 million barrels. In the East Coast region last week inventories fell by 0.1 million barrels while, at the same time, Gulf Coast inventories remained relatively unchanged. The combined Rocky Mountain/West Coast region reported a weekly gain of less than 0.1 million barrels. Propylene non-fuel use inventories remained relatively unchanged last week but its share to total propane/propylene inventories slipped lower to 3.8 percent from the prior week’s 4.0 percent share.
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