Financial Review of the Global Oil and Natural Gas Industry 2014

Transcription

1 Financial Review of the Global Oil and Natural Gas Industry 2014 Markets and Financial Analysis Team May, 2015 U.S. Energy Information Administration Independent Statistics & Analysis

2 Overview This analysis focuses on the financial and operating trends of 75 oil and natural gas companies ( energy companies ). The data come from public financial statements each company submits to the U.S. Securities and Exchange Commission, which Evaluate Energy (a data service) aggregates for ease of data analysis. For consistency, companies that were later acquired by another company in the group were kept in the prior year data. For example, ExxonMobil and XTO s individual numbers were kept through Cash flow statements list various sources and uses of cash; this analysis focuses on three main sources (operations, net debt, and net sales of assets) and three main uses (capital expenditure, dividends to shareholders, and net share issuance). Several charts show comparisons between these upstream companies and the U.S. manufacturing industry, collected from U.S. Census Bureau s Quarterly Financial Report. 2

3 Brief description of terms Cash from operations is a measure of income. Capital expenditures represent cash used for property, plant, and equipment (investing activities). Financing activities measure inflows/outflows in debt or equity markets including dividends, share issuance or repurchases, and debt issuance or repayments. Return on equity is a measure of the profit a company earns on money shareholders have invested. Market capitalization is the total value of all of a company s publicly traded shares outstanding. Net income or earnings represent profit after taxes and depreciation. Asset impairments are when a company writes down the value of a property to reflect current market value, which may decline from loss of production potential or price declines. Upstream refers to crude oil exploration, production, and other operations prior to refining. 3

4 Key takeaways Price declines in the second half of 2014 contributed to reduced profitability for these companies compared to previous years. Free cash flow remained low compared to previous years. Share repurchases and dividends were met by increasing debt and sales of assets. Lower prices contributed to lower proved reserve additions compared to previous years. Some companies increased cash balances given the volatile price environment. First-quarter 2015 results could show significant reductions in profits, cash flow, and capital expenditure because of low oil prices. In refining, geographic differences in refining margins continued in

5 Geographic distribution of companies number of companies United States Canada Europe Other 5

6 Liquids production distribution number of companies less than ,000 greater than 1,000 thousand barrels per day 6

7 Oil and natural gas production for the combined companies million barrels per day liquids production natural gas production (boe) 12 = 10 Note: boe=barrels of oil equivalent 7

8 Oil and natural gas proved reserves for the combined companies billion barrels of oil equivalent oil natural gas = 60 8

9 Oil reserve additions in 2014 were the lowest since 2010 billion barrels of oil equivalent 25 Reserve additions oil natural gas

10 Reserve additions were above annual production for oil and gas reserve replacement rate 250% 200% oil 150% natural gas 100% 50% 0% 10

11 The SEC requires companies to value proved reserves on an average of the prices on the first day of each month $/b Brent 2014 average based on first-day-of-the-month prices=$101.55/b 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: U.S. Energy Information Administration, based on Evaluate Energy, Bloomberg, L.P. Note: SEC stands for the U.S. Securities and Exchange Commission. b=barrel 11

12 Finding costs increased in 2014 while lifting costs fell 2014 $/boe finding plus lifting costs year moving average of finding plus lifting costs finding costs lifting costs 5 0 Note: boe=barrels of oil equivalent 12

13 Exploration and development expenditures were more than 80% of total costs incurred for the third consecutive year 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Share of costs incurred Development Exploration Acquisition of proved reserves Acquisition of unproved reserves 13

14 Cash from operations was $16 billion above the 2013 level billion 2014$ Brent crude oil (right axis) 2014 $/b cash from operations (left axis)

15 Cash from operations: non-cash adjustments and working capital movements offset the lowest income level since 2009 billion 2014$ income non-cash adjustments (depreciation, impairments, loss on asset sales) working capital movements (changes in inventories) Other (taxes, exploration expense) 15

16 Asset impairments as a share of revenue were the highest since % Impairment ratio to revenue 2.0% 1.5% 1.0% 0.5% 0.0% 16

17 Capital expenditures, dividends, and net share repurchases were $110 billion higher than cash from operations in 2014 billion 2014$ capital expenditures, dividends, and net share repurchases cash from operations

18 Cash balances have increased as total sources of cash have grown faster than cash uses billion 2014$ cash balance, end of year

19 Companies sold assets and increased debt to maintain dividends and share repurchases billion 2014$ net asset sales plus net change in debt net share repurchases plus dividends free cash flow Note: free cash flow=cash from operations less capital expenditures 19

20 Changing sources and uses of cash billion 2014$ average Free cash flow Net asset sales plus net increase in debt Note: free cash flow=cash from operations less capital expenditures Net share repurchases plus dividends 20

21 Cash from operations made up less than 80% of cash sources for the third consecutive year Sources of cash 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Operations Net asset sales Net increase in debt 21

22 Capital expenditure remained about 80% of uses of cash fairly steady since 2010 Uses of cash 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Capital expenditure Dividends Share repurchases 22

23 Energy companies long-term debt to shareholders equity ratio increased four percentage points from the 2013 level 60% Long-term debt to equity 50% 40% U.S. manufacturing 30% energy companies 20% 10% 0%, U.S. Census Bureau 23

24 U.S. manufacturing companies and the energy companies increased dividends as a share of revenue in recent years 4.0% Dividend share of revenue 3.5% 3.0% 2.5% 2.0% U.S. manufacturing energy companies 1.5% 1.0% 0.5% 0.0%, U.S. Census Bureau 24

25 Four dollars of new debt paid for a proved reserve barrel, on average, in $/boe net increase in debt per reserve addition 3-year moving average 0 Note: boe=barrels of oil equivalent 25

26 The energy companies had $2.80 of long-term debt for every barrel of proved reserves to end $/boe 3.0 Ratio of long-term debt to proved reserves Note: boe=barrels of oil equivalent 26

27 Returns to shareholders were the lowest since % Return on equity 20% U.S. manufacturing 15% 10% energy companies 5% 0%, U.S. Census Bureau 27

28 Liabilities due within one year as a share of total liabilities fell ten percentage points since 2007 for the energy companies 50% Ratio of current liabilities to total liabilities 45% 40% energy companies 35% 30% U.S. manufacturing 25% 20% 15% 10% 5% 0%, U.S. Census Bureau 28

29 The energy companies increased liquid assets to 28 cents for every dollar of liabilities due within a year 30% Ratio of cash to current liabilities 25% 20% 15% 10% 5% 0% 29

30 Market capitalization compared to net income increased as profits fell faster than share prices 25 Ratio of market capitalization to net income

31 Appendix: list of companies Anadarko Petroleum Corp. EOG Resources Parsley Energy Inc. Apache Corporation EPL Oil & Gas Inc PDC Energy Apco Oil and Gas International Inc ExxonMobil Penn Virginia Approach Resources Inc Forest Oil Corporation Petro-Canada Athlon Energy Inc. Freeport-McMoRan Inc. Petrohawk Energy Corp ATP Oil & Gas Corp. Gazprom Neft Pioneer Natural Resources Company Berry Petroleum Co. Goodrich Petroleum Corp Plains Exploration & Production BG Group Gulfport Energy Corporation QEP Resources Inc BHP Billiton Halcon Resources Corporation Range Resources Corp Bill Barrett Corporation Hess Corp Rosetta Resources Inc. Black Hills Corp Husky Energy Inc. Royal Dutch Shell BP Imperial Oil Limited Sanchez Energy Corp Canacol Energy Ltd. Kodiak Oil & Gas Corp. SandRidge Energy Carrizo Oil & Gas, Inc Laredo Petroleum Sinopec Cenovus Energy Inc. Linn Energy SM Energy Company Chesapeake Energy Corp. Lukoil (US GAAP) Sonde Resources Corp. Chevron Magnum Hunter Resources Statoil ASA Cimarex Energy Co. Marathon Oil Corp. Stone Energy Clayton Williams Energy Mariner Energy Suncor Energy Inc. Comstock Resources McMoRan Exploration Co. Swift Energy Co Concho Resources Inc MDU Resources Group Synergy Resources Corporation ConocoPhillips Murphy Oil Corporation Total Continental Resources Newfield Exploration Company Triangle Petroleum Corporation Denbury Resources Inc. Noble Energy Unit Corp Devon Energy Corporation Northern Oil & Gas, Inc W & T Offshore Encana Corporation Novatek Whiting Petroleum Corporation Energen Corp Oasis Petroleum Inc. WPX Energy Energy XXI Occidental XTO Enerplus Corporation OMV YPF Sociedad Anonima ENI Pacific Rubiales Energy Corp. Note: Some companies exist that merged or split before A total of 75 companies existed for

32 Refining 32

33 Distillation capacity decreased, and utilization increased million barrels per day % distillation capacity (left axis) capacity utilization (right axis) 92% 90% 88% % % 36.5 = = % Note: This chart includes 25 companies 82% 33

34 Refiners with assets around the globe had the largest reduction in distillation capacity million barrels per day 25 Distillation capacity by region 20 Global refiners Emerging Market refiners 5 North American refiners 0 European refiners Note: A global refiner is a company with refining assets in different regions. This chart includes 25 companies 34

35 North American refiners had the highest utilization for the third straight year 100% 95% North American refiners 90% Global refiners 85% Emerging Market refiners 80% 75% European refiners = 70% Note: This chart includes 25 companies 35

36 Refining capital expenditures declined, although they increased as a share of total capital expenditures billion 2014 dollars refining capital expenditures (left axis) share of total capital expenditures (right axis) 36% 32% 28% 24% 20% 16% 12% 8% 4% 0 Note: This chart includes 31 companies 0% 36

37 Refining earnings fell to the lowest since $/b 8 Ratio of refining earnings per barrel processed Note: This chart includes 31 companies 37

38 North American refiners outperformed refiners focused in other regions as well as globally diversified refiners since $/b Ratio of refining earnings per barrel processed Emerging Market refiners North American refiners Global refiners European refiners -2-4 Note: This chart includes 31 companies 38

39 Appendix: list of companies Alon USA Energy Lukoil (US GAAP) Rosneft BP Marathon Oil Corp. Royal Dutch Shell Chevron Marathon Petroleum Corporation Sinopec ConocoPhillips MOL Suncor Energy Inc. Delek US Holdings Neste Oil Tesoro Petroleum Corp. ENI OMV TNK-BP International Ltd ExxonMobil Petrobras (IFRS US$) Total Grupa Lotos PetroChina TUPRAS HollyFrontier Corp Phillips 66 Unipetrol Husky Energy Inc. PKN Orlen Valero Energy Imperial Oil Limited Repsol Western Refining Indian Oil Corp. Note: Some companies exist that merged or split before A total of 31 companies existed for